Malawi Congress of Trade Unions proposes 58% minimum wage rise

Malawi Congress of Trade Unions (MCTU) has proposed a 58 percent increase in the minimum wage from the current K678.76 to K1 075.11 or $1.47 per day to counter the adverse economic conditions which have left many households vulnerable.

While the Ministry of Labour, Youth, Sports and Manpower Development says it is yet to call for a consultative meeting for the wage advisory committee, Ministry of Finance, Economic Planning and Development argued that the demands for minimum wage increment should be balanced with levels of economic activities in the country.

A position paper prepared by MCTU for the national minimum wage negotiations which Business News has a copy, states that raising the minimum wage nationwide will increase earnings for millions of workers and boost the bottom line of businesses and lift many workers out of the dungeon of poverty.

The minimum wage was last raised upwards on October 1 2015 from K551 to K678.76 per day, which is about K18 000 or about $25.

In the paper, MCTU argues that due to the prevailing economic situation, K678.76 is not enough to earn a living considering the current inflation rate, which is 21.2 percent as of August 2016.

Recent statistics from the Centre for Social Concern (CfSC) show that in terms of the basic needs basket, on average, a family living in the city requires about K161 996.00, a jump from K140 003 recorded in December 2015.

MCTU has also suggested a widening tax free band on pay as you earn (Paye), currently at K20 000, to ensure that households meet the needs in the basic food basket.

Reads in part the position paper: “The food basket rose by 15.7 percent from December to June 2016, which contributes K106.56 to the proposed 2016 minimum wage and fuel prices rose by an average of 4.4 percent for petrol and diesel which contributes K29.86 to the new minimum wage proposal.

“From MCTU’s perspective on Paye/tax, the standard rate is 16.5 percent of the value added tax. With the recent developments of MRA machines, which are supposed to be in all shops, it means consumers will be taxed 16.5 percent on all the services.”

The paper says workers’ wages ought to be in line with the VAT to enable them have a buying power. In this scenario, 16.5 percent VAT on the minimum wage will add up to K111.99 contributing to the new minimum wage.

MCTU’s paper argues that in line with the inflation rate, there should be an increase of K147.97 contributed to the minimum wage.

“It would be better if we ensure that every Malawian lives above income poverty line of $1.25 [K912] a day. Currently, the dollar is trading at K730, but the minimum wage is K678.76. Surely, Malawians are living under terrible situation. We hereby submit our position for your consideration.”

Ministry of Labour, Youth, Sport and Manpower Development spokesperson Simon Mbvundula said that his ministry had asked for a position paper and it is yet to call for a consultative meeting for the wage advisory committee.

But Treasury spokespersonMsowoya said: “Since most firms are struggling economically, such demands may force them to downsize and layoff people, which should be discouraged at this stage.”

However, Catholic University head of economics Gilbert Kachamba said that the revision is long overdue considering the current economic environment, adding workers need to be paid not less than K2 000. n