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An hourly wage policy is a key to resolving Ghana's rising graduate unemployment challenges

UNEMPLOYMENT SURGE Ghana's unemployment rate is high

Thu, 24 Feb 2022 Source: Solomon Atta

Every graduate out of the over 100 thousand school leavers that churn out of Ghanaian universities and colleges dreams of landing a formal sector job where wages are structured.

But that’s practically unattainable. Why? Because only about 10% of the Ghanaian economy is in the formal sector, according to the Ghana Statistical Service.

The 90% informal sector mostly produces jobs that pay extremely low and unstructured wages, usually unregulated by labour laws, as revealed by the 2020 Ghana Labour Survey Report compiled by the Danish Trade Union Development Agency. That makes it an unviable avenue for employment for young school leavers.

The situation is further compounded by the lack of social protection wage regime in Ghana. The national minimum wage which applies mainly to the informal sector is currently pegged at GH₵12.53. That translates into a meagre 1.6 per hour ($0.23 per hour with the prevailing Bloomberg exchange rate of 6.7 cedis to a dollar) and GH₵250 per month. That’s economically nothing to write home about, and socially non-enticing for a young school leaver seeking to make ends meet.

So, why is the hourly rate wage policy the solution?

The answer lies in making every job in the Ghanaian economy, being in the formal or informal sector count. Every job would matter if by policy labour efforts can be measured and remunerated per hour with a decent living wage rate.

Hourly wage, thus, provides a standard measurement for every economic activity within the country to create jobs no matter their location, or how small or informal they may be.

It also provides an avenue to develop part-time and over-time systems to protect employees who are forced to work longer hours or shorter duration to be paid a daily wage.

In the Western countries, for example, when governments put out the number of jobs they create in their economies, most of that fall in menial jobs such as cleaning, warehouse jobs, retail assistance, private security, customer service, shopkeepers, cashiers, chefs and cooks, street cleaners, landscapers, farm labourers, baby seaters, maids, etc.

All these job categories are measured and paid in hourly terms as determined by the central or a local government administration and commensurate with the national living standard.

What those governments are assured of is that any person being a graduate or non-graduate benefiting from these jobs can at least support themself to have a meaningful standard of living.

If you juxtapose that in the Ghanaian context, these are typically extreme low-standard wage paid jobs school leavers hardly consider. The concept of hourly wage rate is thus meant to bring all economic activity no matter how informal they may be in the job creation bracket and at the same time protects every labour effort.

How best can the government implement this policy?

The challenges of an economy migrating to an hourly paid system could be overwhelming to employers if wages are lifted astronomically in a single year. That could lead to job retrenchment due to the rise in the cost of labour and perhaps higher inflation.

The approach should therefore be incremental, with hourly wage adjustment spreading over five years until the minimum paid job reaches the living wage standard to give employers the opportunity to adjust to the policy.

The first year could be dedicated to developing the basic structures including: (i) a wide consultation and public education (ii) labour market survey to collect the national job classification and training requirements (iii) develop the structure in terms of the number of hours making full-time, minimum hours for part-time, and overtime pay regulations.

Year two to year five would start actual implementation with a small upward adjustment year-by-year—in an incremental fashion until the government achieves an hourly wage level that commensurates with leaving standards.

For such a policy to be successful, the government must first show leadership by restructuring its employees’ salaries into hourly terms for the private sector to follow suit.

In addition to that, given that the government is the biggest spender in the economy, it could make a policy for all labour force working directly and indirectly on government projects and programs to be paid in hourly terms. This would be a standard for the private sector to follow.

Ultimately, it is the entire economy that benefits as labour efficiency and productivity would increase significantly, so are income taxes paid to the government.

Columnist: Solomon Atta