Low minimum wage fuelling poverty—CfSC

 2022/23 budget analysis by the Centre for Social Concern (CfSC) has found that maintaining the monthly minimum wage at K50 000 will disadvantage majority of low income earners.

In the analysis, CfSC director James Ngahy said their studies based on monthly 2021 Basic Needs Basket findings show that the cost of living has been rising, hitting K236 000 for a family of six in January 2022 from K164 000 in June 2021.

He said: “CfSC is of the view that the low minimum wage is not necessarily due to performance of our economy, but rather total negligence and maintenance of exploitive policies.

“Centre for Social Concern believes that an increase in minimum wage will support majority of Malawians to move out of poverty line. We need to put deliberate policies to cushion low-income earners who are struggling to survive.”

Ngahy said they feel the 2022/23 Budget is mostly focusing on economic recovery of rich people who are offered incentives such as duty-free imports of luxuries and monthly benefits at the expense of poor taxpayers.

But Employers Consultative Association of Malawi executive director George Khaki observed that increasing the minimum wage beyond current K50 000 could lead to retrenchments as some employers are struggling to meet the current minimum wage due to Covid-19 and a poor economic environment.

In the proposed K2.84 trillion National Budget, Minister of Finance and Economic Affairs Sosten Gwengwe admitted that consumer prices accelerated during the 2021/22 fiscal year largely due to an increase in food and fuel prices.

In the fiscal year, headline inflation, which had been in single digits for close to two years, recently crept back into double digits, as it accelerated to 11.5 percent in December from 9.1 percent in June 2021.

Food inflation, which has been the main driver of inflation, rose to 13.6 percent in December 2021 from 11.1 percent in June 2021.

Similarly, non-food inflation increased to 9.5 percent in December 2021 from 7.2 percent registered in June 2021.

In the proposed budget, Gwengwe also maintained the tax-free band at K100 000, but came up with a new monthly pay as you earn schedule.

However, CfSC said Paye, as a taxation system, is an injustice to low-income earners as the cost of living is now at K236 000.

“Taxing 25 percent to Malawians earning less than the current cost of living is unfair to low salaried workers who are struggling to survive,” reads the analysis in part