Govt wage bill sabotages economic recovery

via Govt wage bill sabotages economic recovery – The Zimbabwe Independent April 8, 2016

ZIMBABWE’S public sector wage bill poses a serious threat to fiscal and macro-economic stability as it has one of the highest employment costs in the region, according to a report launched yesterday.

By Kudzai Kuwaza

A study titled Wage Structure and Labour Costs in Zimbabwe: An Analysis of Flexibility, Competitiveness and Equity conducted by the Labour and Economic Development Research Institute of Zimbabwe and commissioned by the United States Agency for International development says the country’s high wage bill has resulted in low investment in capital projects.

“The analysis has shown that the public sector wage bill poses a serious threat to fiscal and macroeconomic stability as the country has one of the highest public employment costs in Sub Saharan Africa,” the report, that analyses the wage structure and its determinants in both the public and private sectors and its impact on the economy over the period 2009-2015, says.

“In particular, the public sector wage bill has far outstripped growth in real GDP. The high public sector wage bill has crowded out necessary public investment in capital projects and the social services.”

The report also notes there is high public wage premium with average public sector wages outstripping those prevailing in the private sector.

The report observes that there are huge income disparities between top management and middle management, top management and ordinary workers and between middle management and ordinary workers within enterprises.
The analysis of unit labour costs, the report says, has shown that labour costs are generally high in Zimbabwe compared to the rest of Africa and Asia.

Increasing productivity is the best and most sustainable way of reducing unit labour costs by firms, the report suggests, adding that productivity growth should drive wage growth, which should in turn fuel demand growth and transition towards higher employment levels.

Some of the recommendations in the report include instituting fiscal rules to put a cap on the public sector wage bill, using biometric payroll registration of public sector employees to strengthen payroll administration and passing a Statutory Instrument limiting parastatal and municipal wages.

Other recommendations include aligning of the public service salary negotiations with the national budget process and resuscitating the National Productivity Institute as a basis of coming up with national and sectoral scientific benchmarks to guide productivity bargaining, adopting an integrative collective bargaining process.