Ministry of Labour’s decision to increase the minimum wage by 40 percent has drawn mixed reactions with workers’ representatives stating that it falls short of cushioning the high cost of living while economists foresee potential downsizing.
Making the announcement in Lilongwe yesterday, Minister of Labour Peter Dimba said the general minimum wage has increased from K90 000 to K126 000 per month while the rate for domestic workers will increase from K52 000 to K72 800 per month and that of the micro-enterprises has been increased from K75 000 to K105 000 per month.
He added that the minimum wage for international truck drivers for 30 tonne vehicles and above has increased from K234 500 to K328 300 per month and that of local drivers is revised from K167 500 to K234 500 per month. On the other hand, those driving trucks below 30 tonnes will be getting K140 700, up from K100 500.
The minister, who said the new rates are with immediate effect, explained that minimum wage does not mean maximum wage.
He said: “There is a general tendency by employers to set wages around the set minimum wage. This is not the right way to do things.
“Employers need to set wages to ensure a just and equitable share of fruits of progress. Employers should learn to share profit responsibly. When the business is doing well, employers should be ready to reward their employees fairly.”
Dimba said government has also introduced a category for shop workers for shops with annual turnover of K500 million per year, in which the minimum wage has been set at K150 000
He said the new rates have taken into account devaluation of kwacha, level of economic growth, inflation rate, shortage of forex, bank lending rate, the effects of wages on employment and avoidance of wage push inflation.
But Malawi Congress of Trade Union (MCTU) president Charles Kumchenga said the union wanted a 100 percent increase.
In an interview yesterday, he said although government stated that it considered various factors in coming up with the figure, MCTU was not impressed with the 40 percent.
“The cost of living is very high and people are struggling to provide for their families. We will consult our members on whether to accept the 40 percent or not,” said Kumchenga.
In a separate interview, Professional Drivers Union of Malawi secretary general Mphatso Molleni also described the 40 percent increase as being on the lower side.
He said the union proposed a 150 percent increase and it would have made sense if government considered an increase of at least 100 percent.
“We are yet to receive formal communication on the increase, but our members are not happy with what has been announced. As a union we will come up with the way forward. The members need to agree but it might be a sit in,” said Molleni.
On his part, Lilongwe Domestic and Shop Workers Association chairperson Jaffar Abdul Rahman also said the 40 percent was on the lower side, but said the workers have no choice on the matter.
“The challenge is that our bosses will meet exactly the minimum wage. They don’t consider how long you have been employed,” he said.
The Lilongwe Shops and Domestic Workers Association earlier demanded over 140 percent salary increment to adapt to the rise in the cost of living. They wanted the salary for shop workers to increase from K90 000 to K220 000, and for domestic workers to be increased to K180 000 from K52 000.
Employers Consultative Association of Malawi (Ecam) executive director George Khaki said he needed to consult members on the rise, but proposed that due to the unstable economy, government and other stakeholders should be reviewing the minimum wage annually rather than waiting for three years as stipulated in the Employment Act.
“We also need to see what the effects of the current increases are, whether they are going to aid job creation or there will be job cuts. We will need to sit and look at the outcomes of the current wage increases so that these may input into the next round of negotiations of minimum wage,” he said.
On the other hand, Economics Association of Malawi (Ecama) president Bertha Bangara-Chikadza said the 40 percent minimum wage increase has the potential risk to force some employers to downsize their workforce, particularly in the labour-intensive and informal sector firms.
In a written response yesterday, she said the impact on employers depends on the size of the business and sector, adding that there are chances that the micro and small enterprises (MSEs) will struggle to absorb the 40 percent hike.
Bangara-Chikadza, who teaches economics at the University of Malawi in Zomba, said: “Some employers may resort to downsizing, increasing informality, or delaying new hires to offset the increased wage burden.
“This could neutralise the intended employment benefits of the wage hike. The outcome will depend on how fast inflation stabilizes and how businesses respond to demand shifts.”
However, she said the risk of wage-push inflation is moderate given the suppressed demand environment and cautious monetary policy stance.
On whether the 40 percent was a fair deal to employees, the Ecama president said in light of the significant erosion of real income over the past two years, the adjustment is partially restorative but not fully compensatory.
She said the MCTU had a strong basis for demanding 100 percent, especially against the background of the cost of a basic needs basket.
During the consultations, MCTU proposed 100 percent increase of the minimum wage while Employers Consultative Association of Malawi proposed 30 percent increase.
