By Morrison Rwakakamba
Improved and rationalised salaries for public workers will drive economic growth
While delivering the Budget Speech for Financial Year 2014/15 (In accordance with Article 155(1) of Constitution of Uganda) on the 12th June 2014, the Minister of Finance Planning and Economic Development (MFPED), Hon. Maria Kiwanuka, announced that Shs 450 billion was allocated to enhance the salary of all Public Servants. This includes provisions for the teachers’ pay increase in line with Government’s agreement with the Uganda National Teachers’ Union (UNATU). The salary of the lowest paid Teacher will therefore increase by between 15% and 25%. Other Public Servants’ salaries will also be adjusted within the available resources. This is good for the economy- going forward.
You know, there is a tendency to think that improved salaries/wagesfor public and private workers constrain economic performance of countries. Those who argue against higher pay for workers in both public and private sectors look at salaries through the prism of burdensome recurrent cost stream that should be at minimal if farms and firms are to be efficient. Yet, better pay has potential to expand fortunes of companies and governments through its ability to stimulate productivity of the workforce. Of course the other credible argument is that improved salaries are only desirable if they are matched by improvement in performance of the workforce. But there is more to this dominant narrative.
New York University economics Professor, William Easterly argues that higher wages for workers drive aggregate demand and in turn grows the economy. I agree with him- because demand is the oil that lubricates the engine of any economy. We should therefore not be enemies of demand.When middle-class or working class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy from top to bottom.
I for instance visualise a teacher, health worker, administrator etc. who gets additional wage in your locality- they will most likely buy consumer goods or invest in businesses- small and big. This has a multiplier effect to the economy.
Far away in the United States, the revered Chief Executive Officer Henry Ford, a manufacturer of Ford brand of cars, made it his mission to pay his workers enough so that they could buy the cars they made. By doing so, the market for his cars began from within and stretched across all nations on earth.
Incentivisingthe workforce through high wages/salaries requires a delicate balance based on rationalisation if we are to stimulate morale and productivity of workers in the public sector. It is for example common knowledge that the wage structure of civil service in Uganda is confusing. There are some officials who even earn salaries or what some call ‘take-home” that are higher than what the President and Prime Minster of Uganda earn.
Of course some of these distortions are explained under things like allowances, mileage, facilitation, severance etc. But these distortions are not democratic.
For example, teachers and nurses do not have these allowances. Some people are asking legitimate questions like – Why are for example Members of Parliament earning ten times more than a teacher? Yet most members of Parliament have the same qualifications, or rather some teachers have even better qualifications than some Members of Parliament since the minimum qualification for a member of parliament is equivalent of Advanced Certificate of Education. This is a genuine question that should be resolved by a wage restructured regime that looks at ingredients like- qualifications, specialty and expertise, uniqueness of labour, labour demand, risk, working conditions, expected results etc. This kind of structure breeds equity and balance in the economy.
Allowances should also be rationalised. For example, data visualisation by Advocates Coalition for Development and Environment (ACODE) shows that Parliamentary Commission expenditure is shooting through the roof.
From Shs82 billion in the 2008/2009 financial year, it hit Shs280 billion in the 2010/2011 financial year and continues to grow. A deeper drill into the datasets shows that many MPs are spending tax payers’ money on foreign trips without clearly showing benefits of their trips to their constituents and the country. Of course, some MPs file reports – but the majority do not.MPs are entitled to an allowance of Shs1.4 million (US$550) per day spent out of the country on official duty.
For example, on Nov. 21, 2011, the media reported that Shs8.5 billion was allocated to facilitate at least 300 of the 344 legislators on foreign travel for the financial year 2011/2012.In a space of just four months, Shs2.2 billion had already been spent on MPs’ foreign travels – an average of Shs550 million per month. Whereas some MPs trips or other public officials are justified, travels should be streamlined to national interest to avert bloating public administration expenditure and balance our wage bill.
Morrison Rwakakamba is the Chief Executive Officer of Agency for Transformation and also a Special Presidential assistant on Research and Information in State House.