Following the challenge by President Mahama and his Trade and Industry minister to public sector employees and TUC respectively, to follow their example and take a pay cut, I analyse the recently announced 10% Executive pay cut and the above requests to public sector workers in the context of the out of control public sector wage bill commonly known as the Single Spine Salary Structure and pose the question, was the Executive pay cut a trick?
Since the Finance Minister, Mr Seth Terkper announced in Parliament on November 19, 2013 that the President and his ministers will take a ten percent pay cut from 2014, there have been debates on this gesture by the Executive arm of government amongst Ghanaians from all walks of life. Opposition parties claimed the decision was a political gimmick whilst the ruling NDC and its propaganda machinery are of the view that the sacrifice is unprecedented and President Mahama in particular, should be commended for the novelty. Some of them challenged the Legislature to follow the example of the Executive and there have been calls on other public workers to follow suit.
Though the calls were unofficial, the Minister for Trade and Industry, Mr Haruna Iddrisu was the first to officially and publicly challenge the TUC to take a cue from the Executive. According to him, the 10% pay cut by the Executive should inspire TUC and Ghanaians to sacrifice more for the country and underscored the need for labour to rise to the challenge in ensuring prudent management of the wage bill which will help accelerated national development. He concluded that, “We are simply making an appeal to labour to be ready to sacrifice more as we deal with the challenge of wage overrun” (see “Minister challenges TUC to emulate Mahama’s 10% pay cut”, Myjoyonline/Ghanaweb, December 1, 2013).
That was followed immediately by President Mahama himself with a similar challenge to all public sector employees. Launching the Campaign for Accelerated Maternal Mortality in Africa (CARMMA) and the Newborn Health Week celebration accountability report in Accra last Saturday, President Mahama urged others to follow the initiative by the government, instead of criticising it. He said if all public sector employees followed the example and gave just two percent of their salaries to build Community Health Programme and Service (CHPS) compounds, “we’ll be able to build 2,000 CHIPS compounds across the country” (see “Mahama challenges critics to take pay cuts”, Graphiconline/Ghanaweb, December 2, 2013).
From the above, I can say without doubt that, the decision by the Executive to take a 10% pay cut was not a sacrifice out of love for country but a carefully orchestrated bargaining chip, a con or a trick to force pay cuts down the throats of public workers in an effort to reduce the huge public sector wage bill. President Mahama and his ministers are now con artists attempting to trick their way into the pockets of low paid public workers in the hope of cleaning up their mess and incompetence with the implementation of the Single Spine.
Mr President, public workers did not take the final decision on the salary grades within the Single Spine, neither were the levels of the various professional allowances. It is your government under the late President Mills who for political expediency rushed to implement the policy without considering how much it would cost the state and how the state would pay for them.
The argument that a 2% pay cut by public sector employees would raise enough funds to build 2,000 CHIPS across the country does not hold water for a number of reasons. First, such pay cuts will have significant negative impact on the purchasing powers of ordinary workers who are most likely to spend the money in the market and increase economic activity than save it. Therefore such pay cut will negatively affect the economy by reducing demand for goods and service which will lead to reduced production. This is not economically a good option.
Even if public corruption is eliminated and all the funds raised through the 2% pay cut are invested for the suggested objective, there is no guarantee that the 2,000 CHIPs would be built on time and within budget and in the end inflation could reduce the total to be built to less than half or at best, the country will be left with uncompleted and abandoned CHIPS. Last but certainly not the least, it is not the business of government to trick public workers for pay cuts to spend the money on public projects but to raise funds through general taxation and prudent economic management. This trickery is an unfair tax, in fact, punitive tax since it is being raised only on public employees.
On the other hand, Mr President, the 10% Executive pay cut will have negligible impact on the purchasing powers of yourself and your ministers, many of whom get free benefits such as free accommodation, transport, water, energy and others. Again, they will benefit from huge ex-gratia of hundreds of thousands of cedis at the end of the four years as both minsters and MPs. Whilst many public employees could only take home peanuts as end of service gratuity after 20 to 30 years public service. The 10% pay cut therefore will have no positive or negative impact on the economy, at least, in the short and medium terms, unless it is made permanent and together with other measures at reducing the cost of the Executive to the public purse.
Mr President, if you and your ministers planned to use your 10% pay cut as a bargaining chip to secure concessions from public sector workers, I am afraid, it will backfire big time. This is because in Employment Law, the employer cannot unilaterally impose a pay cut on workers either directly or indirectly as you are trying to do without negotiations and agreement with the workers or their representatives (Union). If that happens, there are two alternatives. Either the workers reject the imposed offer and resign for breach of contract/trust or the employer must sack all the workers and impose the new terms and ask each worker to reapply. Whichever option is the outcome, either of them may end up in court. Is that what you intend to do if your challenge is rejected?
Instead of using this “Kwaku Ananse” Executive pay cut to compel public workers to also take pay cuts, please consider long term strategic solution to reducing the public sector wage bill because what you asking for is not the solution. For example, for how long will the Executive take a pay cut and force public workers to do the same? Unless both pay cuts are made permanent (that is annual pay cuts) until the wage bill is manageable this trick will do little to reduce the huge public sector wage bill. It’s like scratching the surface instead of uprooting the problem form the causes of too many public workers, ghost workers and low productivity.
In addition to reducing the total public sector staff and eliminating ghost workers within the sector, I recommend that, Mr President you implement effective measure to plug the leakages by the revenue collection agencies and reduce the numerous free benefits, including tax free salaries enjoyed by certain public officials. These would be permanent and if prudently managed they should raise sufficient funds to pay the public wage. If all taxes alone are collected and paid to the state without the corruption, I believe the government will have more than sufficient funds to pay public sector employees and for infrastructure development without the need for budgetary assistance from donors and the huge loans from China. Government is about reality but not tricks and magic numbers to con the masses or your way into government. The reality is catching with up NDC for Single Spine propaganda (praising it as doubling workers’ pay before elections and blaming it for huge public sector wage after the elections). You cannot eat your cake and still have it.