Employers Consultative Association of Malawi (Ecam), a representative body of employers, has expressed fears of potential jobs losses due to the increase in minimum wage from K25 000 to K35 000 per month.
Ecam executive director George Khakhi said in an interview yesterday that with the 40 percent raise in minimum wage, employers that are struggling to pay salaries could retrench employees while others may shift to automation to minimise production costs, thereby impacting on jobs.
Khaki said more firms in the small and medium enterprises (SMEs) category could end up reverting to the informal sector, which could cost government tax revenue.
He said: “What we are seeing with this hike is that, already, we are suffering with pension arrears and having minimum wage increased could put more pressure on employers.
“So, the higher you raise the minimum wage, the more costs that employers will have to incur. We will be doing a study next year to establish the exact impact of this wage hike,” he said.
In his 2019/20 National Budget Statement a fortnight ago, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha said the adjustment in minimum wage will help protect lowly-paid workers and improve their welfare.
The minimum wage hike came three years after Treasury last increased the rate by 24 percent from K19 000 to K25 000 a month.
But Malawi Congress of Trade Union (MCTU) secretary general Denis Kalekeni yesterday said in an interview the revised minimum wage offers no hope for workers as they will be failing to meet basic needs with K35 000.
He said the current rate does not make economic sense in view of the cost of living at K196 450 per month for a family of six, acccording to Centre for Social Concern (CfSC).
He said they had proposed K45 000 as minimum wage, which was later trimmed to K38 000.
“We understand that the general minimum wage could cost jobs for most domestic workers; hence, going forward, we have agreed to move to sectoral wages where each sector should have its own minimum wage depending on the capacity,” he said.
Economics Association of Malawi (Ecama) executive director Maleka Thula said salary increments are usually associated with further increases in prices of goods, which does not help to increase household’s disposable income.
“One-size-fits-all kind of minimum wage has a potential of rendering a sizable section of workers jobless as it would be costly for some sectors to keep a certain number of workers.
“Furthermore, companies especially those providing goods and services may simply pass the increased cost of production arising from salary increments,” he said.
Ministry of Finance, Economic Planning and Development spokesperson Davis Sado yesterday said before adjusting the minimum wage, internal consultations are done with relevant bodies, adding that Ministry of Labour, Skills and Innovation as policy holders, are also key.