Effect of Current Economic Condition on Employee Spending Patterns

Zimbabwe has been
subject to rising high inflation rates which promise to remain high till the end
of the year. The next three months promise to be very difficult
economically. In
June 2019, the country reintroduced the Zimbabwe dollar, in which most
transactions were to be conducted. Unfortunately, due to substantial economic
activity in the informal sector, most prices quoted by vendors in the local
currency are actually determined by the United States Dollar (USD). Thus, the
price of goods regularly increases in line with the exchange rate, thereby
causing salaries of employees who earn in the local currency to lose their
purchasing power.

In times where
salaries lose purchasing power, employees tend to buy more inferior goods than
they normally would, whilst minimising the luxury and normal goods they
purchase. An inferior good by definition is any good that consumers demand more
of when their real income decreases, and less of when it increases (Barreto,
2009). The term inferior does not necessarily mean an inferiority in quality.

We recently undertook an employee spending
patterns survey that assessed the spending patterns of employees
working in Zimbabwe in this current economy. The aim of the survey was to
identify the spending and saving habits, as well as, attitudes toward
employment in Zimbabwe from the employees’ perspective in the economic
hardships.

Nearly half (48 percent) of
the participants are spending majority of their salaries on groceries and forty
two percent (42 percent) of the participants are spending on school fees for
their children.

Majority of the participants
(76 percent) reported that they do not have savings. People are surviving
without an emergency fund set up aside that can help them in time of need. This
is contrary to the 50/30/20 rule that states that in general employees should
have at least 20% of their remuneration set aside for savings and emergency
needs.

A large percent of the
participants (39 percent) are not keeping any USD at home. For those that are
getting a chance of obtaining USDs, they are keeping an average of US$473 at
home. This might be people who are working in sectors that pay in USDs.

When it comes to keeping
USDs in bank accounts, the majority of the participants (77 percent) do not
have any USD in the bank and those that have USD savings in the Bank are
keeping an average of US$6,901.

In an attempt to cut costs,
spending on groceries (31.7 percent) and travelling expenses (23.2 percent)
were the most reduced by most people.

Half (50 percent) of the
participants do not have any savings in USD and those that have savings in USD
have an average amount of US$5,528.

The results reviewed that a
small percent of the participannts (6 percent) obtain their foreign currency
through the bank. Majority of the participants (76 percent) got their foreign
currency from the black market.

Majority of the participants
(77 percent) said they would take a job opportunity from a foreign country.

A large percent of people (55
percent) that are paid in RTGS dollars do not believe it is worth being
employed whilst seventy nine percent (79 percent) of the participants that are
paid in USD believed it is worth being employed. Sixty five percent (65%) of
the participants that are paid partially in USD and partially in RTGS dollars
also believed it is worth being employed.

Most of the paticipants (63
percent) of the participants that spent majority of their salaries on groceries
did not believe it was worth being employed and sixty percent (60 percent) of
the participants that spend majority of their salaries on their children’s
school fees believed it was worth being employed.

Most of the sectors are
dominantly paid in RTGS dollar. Eighty four percent (84 percent) of the
participants that were paid in RTGS dollars did not have any savings.

People’s spending patterns
have changed.  With investors losing
investment confidence in Zimbabwe, the last quarter will be difficult
economically for people. People are forced to fous on basic needs and inferior
products. Zimbabwe are being forced
to adopt a short-term mindset or culture (where money is concerned), as the
majority of participants neither had any savings or an emergency fund set up.
This is supported by the categories which the fewest participants spent their
salaries on, namely investments, home improvement, and own education. All these
categories have an element of forward planning and thinking. This hand-to-mouth
culture could be a result of a shortage of disposable income and/or the
diminishing purchasing power of salaries in Zimbabwe. Although companies have tried to give employees cost
of living allowances to cushion them for the rise in cost of living, it is not
enough to match the inflation rate.

One can safely conclude
that, the current economic condition have affected how employees spend and keep
their remuneration.

Benjamin Somnbi is a Data Scientist, Entreprenuer, & Business Analytics Manager- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/benjamin-sombi-86ab5394/ Phone +263 4 481946-48/481950/2900276/2900966 or email: benjamin@ipcconsultants.com  or visit our website at www.ipcconsultants.com