It’s not the salary that matters but what it can buy

If you are an employee brace up for frustration throughout your working life.

According to Jack Milne, “your employer will never pay you more than just exactly what he has to pay in order to keep you sitting behind your desk. He would be a bad businessman if he paid you more! So your salary level is carefully designed to just keep pace with your aspirations and what you need to live- no more.”

A lot of Zimbabweans would argue that they are not even getting enough to live on, and therefore their salaries must be adjusted.

Thirteen years ago, I wrote a story when Zimbabwe was sliding into an even worse economic crisis than it is in today, that it is not what you earn that matters, but what it can buy.

Zimbabwe Congress of Trade Union president at the time, Lovemore Matombo, argued that salaries should automatically be adjusted to meet the poverty datum line.

Businessman Luxon Zembe said people should not just focus on figures.

“They should focus on what that money can buy. It is better to earn even $100 if that will enable you to pay your basic requirements and leave you with some change instead of earning millions that cannot buy anything,” he said.

Zembe argued that raising wages without addressing the economic fundamentals that were responsible for the escalating costs would simply mean that people’s wages would continue to chase prices.

With the current wage demands by civil servants especially, and the highly speculative nature of our business sector is this not what is likely to happen if say civil servants were paid the Z$4 000 plus minimum salary they are demanding?

Economists agree that unlike in 2008 inflation at the moment is not being driven by the government printing money. It is driven by the speculative exchange rate which is being used by the business sector to peg prices.

Andy Hodges says the exchange rate used by business to peg prices is not related to current official and black market rates but what the speculators believe the rate will be, what he calls the replacement value.

One economist warned the business sector a month ago that most shops will close in two months if they keep on raising their prices because there will reach a stage when people cannot afford to buy the goods.

One of the large supermarket chains had to throw away dozens of eggs because people could no longer afford to buy them.

A chicken producer had to slash prices when his chicken went bad and had to be removed from shelves because no one was buying it as the competition was charging just over half his price.

While there is need to adjust salaries, the current wage demands can only make things worse.

Eddie Cross says if the interbank market is allowed to function transparently the exchange rate will go down to 4:1 from the current 9:1. He argues that the central bank is meddling.

But even if the rate drops, it will not be surprising if businesses do not reduce their prices by half because of a very weak consumer culture.

Information secretary Nick Mangwana wrote some weeks ago: “The bane of Zimbabwe is its lack of effective consumer activism.  We have all sorts of activists and movements but when it comes to consumer rights- zilch. Maybe the same capitalists funding other activists are the beneficiaries of consumer exploitation.”

One observer once wrote that the problem with Zimbabweans is that when prices rocket, they panic buy instead of boycotting the goods so that prices go down.

But the government’s reintroduction of the Zimbabwe dollar and making it the sole legal tender seems to be levelling the field because in the past things were getting cheaper and cheaper for those with foreign currency even if the prices rocketed in local currency. Now because of the tight rein on money supply, things have also become expensive for those with foreign currency because the black market rates have plunged.

Maybe there should be more consumer resistance to force prices down rather than clamouring for wage increases which workers are not likely to be awarded. They have the power to do so because the customer is king but the employee is not.

Watch Andy Hodges explain inflation

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