Trends in Wages, Salaries, and the Cost of Living

The cost of living is the amount of money needed
to sustain a certain standard of living by affording basic expenses such as
housing, food and healthcare. Cost of living is often used to compare how
expensive it is to live in one city versus another. For both Trade Unions and
Employers, the cost of living changes are important as they have an impact on  how employees are remunerated.

Using Zimstat 2017 Poverty, Income, Consumption
and Expenditure Survey Report, it is observed that 26.6% of the adults 18 years
and above in Zimbabwe depend on salaries and wages as their main source of
income. In urban areas the main source of income are salaries and wages
(63.9%). It
was also observed that the persons with the highest primary income in Zimbabwe
are Managers earning an average annual gross income of US$14,881, followed by
Professionals earning an average annual gross primary income of US$6,929. Most
employed persons (34.1%) earn monthly gross primary income of between US$451
and US$600. Given the changes that have taken place on the fiscal and monetary
policies, the key question is how much of the 2017 incomes have been eroded by
inflation and devaluation of the local currency?

The
cost of living in Zimbabwe has significantly increased compared to last year.
Inflation is on an upward trend. Employee remuneration has been eroded by a
factor of 10 which is the average exchange rate now. It is safe to say at this
stage most employees are struggling to make ends meet given the devaluation of
their salaries and rising inflation. The
subsequent business challenges emanating from the policy changes have brought
in new challenges related to how people are remunerated.

The
changes in fiscal  and monetary policies
has impacted on how employers structure their remuneration. While other sectors
have the leeway to remunerate in forex, others do not have that luxury. In sectors
where they can remunerate in forex, they have a better chance of attracting
skills.  

To
tackle cost of living pressures and achieve maintain sustainability of remuneration
it may be necessary to look at the following options.

1. Restructure the wage system and make the remuneration system flexible and competitive in line with the
   cost of living. The system must be flexible to accommodate both good and bad
   times without threatening the existence of the business or the job security of
   the employee.
2. Link wages to productivity as it is the only way to sustain higher
   wages.
3. Negotiate for once off payments at NEC as an
   interim measure. This will ensure sustainability as the once off payments do
   not add to fixed costs. The modalities can be worked out for each NEC. In the
   same negotiations, make sure the Collective Bargaining Agreements run for a
   period of no more than three years to accommodate economic cycles.
4. Reconfigure NEC Pay Structures – Let us change
   from minimum wage to “Going Rate.” Create significant pay progression from one
   grade to the other. Create and widen pay ranges.
5. Create an affordability matrix based on
   factors that matter to your industry. Those doing well will pay more and those
   not doing well will pay less.

Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 4 481946-48/481950/2900276/2900966 or email: mnguwi@ipcconsultants.com  or visit our website at www.ipcconsultants.com