It’s not what you earn but what it buys that matters

It’s an argument that I know I will never win. But my colleague and I have agreed to disagree. He whines about ever escalating prices. I argue that things are getting cheaper in real terms. The problem is that real wages are declining drastically.

Looking at the millions he is now earning and the millions he has to pump out for goods and services, he insists life is now just too expensive. I agree, but still insist things are getting cheaper. Wages and salaries are simply not keeping pace with costs.

I am not an economist, so my argument is based on what Dr Zoba of Power FM says is simple mathematics.

A lounge suite was going for $10 million in December 2004. Last month, it was going for $140 million. Simple mathematics implies its price went up 14 times. My argument is that, the lounge suite is now cheaper in real terms.

At $10 million, one would have forked out US$2 000 in December 2004. With US$2 000 last month one would have walked away with a hefty $190 million at the official exchange rate, enough to buy the sofas and remain with $50 million change.

This is what makes my colleague fume. He says my calculation is too simplistic. Besides, he is not paid in US dollars. Neither am I. But as a layman that is the simplest way I can think of to determine my status.

In December 2004, for example, my colleague was earning the equivalent of US$1 000 a month at the official exchange rate. Though his salary was increased five-fold, he is now earning US$250. Surely, because his salary has not kept pace with rising costs, since he should be earning more than he was last year, things are obviously expensive.

The problem with most people is that they look at their nominal (face value) wages rather than the real ones that take inflation and the declining value of our currency into account. When they realise that the millions they now earn do not even buy the basics, they clamour for more.

The Zimbabwe Congress of Trade Union says the minimum wage should be pegged at the poverty datum line (PDL), which was $17.3 million in December.

Luxon Zembe, President of the Zimbabwe National Chamber of Commerce, says very few employers can afford that. He says the government might agree with the ZCTU to raise the minimum wage to the PDL but this will be more for political expediency. Industry is likely to collapse because very few employers will be able to afford that.

If factories close, the few that remain will not be able to meet demand. This will create shortages. When there are shortages, prices shoot up. Workers are back to square one, demanding more money to buy expensive products.

Lovemore Matombo, president of the ZCTU, agrees that very few employers would be able to afford it, but insists that the PDL will remain their basis for negotiations.

“Every country has a poverty line. In normal circumstances, therefore, wages should automatically be adjusted to match the PDL. It should not be the subject of negotiation as we are doing now. But we know it is impossible to enforce because most companies cannot afford it. But we have to start somewhere and the PDL is the best starting point,” Matombo said.

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.

He argued that raising wages without addressing the economic fundamentals that were responsible for the escalating costs and the declining value of the local currency would simply mean that people’s wages would continue to chase prices.

He said the only way forward was for the Tripartite Negotiating Forum(TNF), which brings together government, business and labour, to agree on how to arrest escalating costs and bring value back to the local currency.

Matombo agreed. But he added that before the labour movement could agree to any negotiations it had to assess whether its partners were genuine.

“You can never trust a politician. They will want to push you out or pull you in for political expediency. But as the ZCTU, we remain focussed. We would like workers to be paid wages that are at least commensurate with the poverty datum line.

“Previously there was a discrepancy between the PDL provided by the government’s Central Statistics Office, one from the Consumer Council of Zimbabwe and the other from the Zimbabwe Congress of Trade Unions. Now all three have the same PDL because of liberalisation. They are now using the same prices.”

Matombo has every reason to be suspicious of government. While the three parties are talking under the TNF, the government is investigating the ZCTU for alleged mismanagement of the labour body.

But one can only hope the three parties, government, labour and business agree that wages and salaries in Zimbabwe today do not make sense any longer especially in view of what they can buy.

Suppressing wages is not the answer. Hiking them without addressing their worth is not a solution either. Perhaps the answer lies within the people because they are the ones who determine what their currency is worth.

While the debate continues, my colleague and I are ready for another round of argument. We always end up agreeing to disagree, but remain friends, very close friends. Perhaps that is what Zimbabwe needs. People do not need to always agree on everything. But when they disagree, they should not regard each other as enemies.

Posted-26 January 2006

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