Zambia: minimum wage rise has unintended consequences

In July, the Zimbabwean government decreed minimum wage increments across various economic sectors that saw pay packets go up as much as five-fold. This was obviously welcomed by groups such as domestic workers, whose minimum wage had been as low as $30 a month.

Well-intended as the plan to ensure something approaching a living wage was, such big and sudden increases had to have many other consequences-and they have.

The cost of business has suddenly gone up significantly for many companies. They are predictably trying to recoup the higher costs by raising the prices of their goods and services, causing across the board increases
(Minimum wage leads to steep food price rises.)

For example, 'n the past month, the cost of 25kg bag of the staple ground maize meal has increased by $1 to $8.50, while other farm produce prices have also risen..

These are disastrous increases which threaten to wipe out a significant part of the benefits of the pay raises, and can have negative political consequences for the same government that was lauded for the pay increases.

Zambian cotton farmers, already struggling with many other viability issues, found that the wage increases made it much more expensive for them to higher labor and to break even, forcing many of them against the wall in a year where a global glut has depressed prices.

Trade Africa