Employers and an economist have warned that raising minimum wage across the board by about 43 percent without a corresponding increase in productivity amid economic downturn could lead to massive job losses.
Speaking during a meeting in Lilongwe on Thursday convened by Centre for Social Concern (CfSC) involving representatives of workers, employers and Ministry of Labour and Skills Development, Employers Consultative Association of Malawi (Ecam) deputy executive director Emmanuel Magomero feared that raising the minimum wage could lead to massive lay-offs as productivity is tumbling due to the impact of Covid-19 pandemic.
He said many employers are struggling or reluctant to pay the living or minimum wage because of loss of productivity due to a number of factors, including Covid-19, power cuts and a hostile microeconomic environment, among others.
Magomero said the existing tax regime and labour laws were other challenges.
He said any increase in salary trigger additional costs such as contribution to pension fund at 10 percent, Tevet levy at one percent, life cover and overtime.
He said: “We are proposing that the living or minimum wage has to be attached to productivity so that when there is better performance, the wage has to be increased.
“Sectoral wage should be considered because other sectors perform better beyond the K35 000 minimum wage.”
In the K722.4 billion provisional budget presented n Tuesday in Parliament in Lilongwe, new Minister of Finance Felix Mlusu proposed a minimum wage increase from the current K35 000 to K50 000 subject to consultations with the Malawi Congress of Trade Unions (MCTU) and Ecam.
On his part, MCTU deputy director for workers education and membership Jessie Ching’oma proposed that the minimum wage should be pegged at K75 000, saying they are pushing for decent work to ensure that lowly-paid workers, including those in the agriculture sector, are well paid.
CfSC director James Ngahy said some employers do not care about the minimum wage; hence, impressing upon government to ensure that minimum wage is implemented across all sectors.
Ministry of Labour and Skills Development labour officer responsible for employment Chisomo Kalugwire said workers have the responsibility to bargain with their employers for better wages, but noted that the challenge is that many workers are in the informal sector which makes enforcement difficult.
In her analysis, Economics Association of Malawi (Ecama) president Lauryn Nyasulu said raising the minimum wage could affect lowly-paid workers.
She said this has the potential to bring about massive job losses if employers find it difficult to comply.
Said Nyasulu: “For domestic workers, this may cause a shift from preference for full time workers to part-time workers paid on daily basis.
“MCTU and Ecam need to consider a move towards sector specific minimum wages to ensure employers comply.”