HomeBusiness DigestErich Bloch Column: Wage negotiations: The stalemate continues

Biti lobbies to restore Zim’s IMF voting rights

To a large extent wage negotiations are confrontational and characterised by extreme obduracy. They usually culminate in deadlocks, instead of agreements, whereupon the wage determinations are arrived at by arbitration or by judicial determination in the Labour Courts.

The wage levels sought by labour are generally understandable. This is because the employment incomes of most workers do not suffice to service the essential needs of the workers, their families, and their dependants. 

Although the horrendous hyperinflation of 2008 has been contained, with inflation levels in Zimbabwe now being less than those prevailing in most of the countries of Africa, Zimbabwe has not attained deflation. 

Prices have, however, not declined but have only stabilised to levels marginally greater than those then prevailing.

The consequences of Zimbabwe having sustained the highest levels of inflation ever endured by any country, throughout recorded history, were horrendous especially for those in the lower-income range.  Not only were a majority of the populace unable to pay for the education and health of their families, but they could not even meet the most basic needs. 

As prices have generally not declined the trials and tribulations of workers, and of those reliant upon them, have continued unabated.

The result of those tragic circumstances is that worker representatives in general, and trade unions in particular, focus wholly on worker needs, with total disregard for the ability or lack thereof of employers to meet their demands. 

As a general rule in almost all negotiations, worker representatives are insistent that the minimum wage should equate with the poverty datum line (PDL).  However, in demanding PDL–related wages, the worker negotiators disregard two key factors.

The first of such factors is that the PDL relates to the requirements of families of six and in Zimbabwe, in any such family there are usually at least two income earners.

However one of them may be operating in the informal sector, instead of being in formal employment. 

Inevitably, the two income earners will not be recipients of identical incomes. 

More often than not, one of them will be generating about 60% of the family’s income, whilst the other generates only 40%.  Therefore the trade unions persistence in demanding that the minimum wage be equal to the PDL, which presently approximates US$546 per month, is unjustifiable. If the PDL is to be the barometer for minimum wage levels, then the base demand should approximate US$328, which virtually equates to 60% of the PDL.

Worker negotiators have also developed an obtuse and contemptuous disregard for the extent of employer ability to pay wages at the levels demanded of them. 

On the one hand, almost all employers are grievously undercapitalised to finance their operations effectively.

The hyperinflation that had prevailed in Zimbabwe was of such magnitude that the enterprise capital resources were decimated and eroded.  The illiquidity in the money market is pronounced, and the limited funding available is exceptionally costly and only available for very limited periods of time. 


Similarly, because of the minuscule extent of accessible foreign investment –– withheld because of concerns about political and economic stability –– it is presently difficult for enterprises to access core working capital and therefore to fund the wages demanded by employees.

The ability of employers to pay well is also very adversely affected by the need to be price-competitive internationally. 

If production costs are markedly greater than those in other economies, then Zimbabweans are prone to purchasing imported products instead of those locally produced. As a result, exports fail to be competitive.  This has already severely impacted upon the viability of Zimbabwean enterprises. 

Illustrative of the impact of labour costs being greater in Zimbabwe than in other countries is that the minimum wage for textile industry workers is South African equates to US$85 per month, whilst in Zimbabwe that minimum wage is US$215.  In China, exporters receive incentives greater than the total labour costs sustained by manufacturers.

Whilst wages paid are generally much less than the workers need, it is long overdue for labour to recognise that inadequate wages are better than total unemployment, with concommitant zero incomes.  The wage determination criteria must endure until such time as Zimbabwe can achieve substantive deflation.

There is also the bad tendency amongst arbitrators to make wage determinations with retrospective effect; whereby they award the increases in wages with back-pay to the date when wage negotiations had commenced. 

For almost all employers this has catastrophic consequences. This is because they cannot increase their selling prices retrospectively. 
The goods or services sold prior to the arbitration were sold at the prevailing prices at that time, and no customers will accept a subsequent price increase for the goods or services already purchased. 

The consequential effects of back-pay awards are massive losses for the enterprises subjected to such. In many instances it results in closure or liquidation of the enterprises, and the loss of employment for their workers.

Arbitrators who award retrospective back-pay are, in practice, doing the workers a grave injustice and worsening their circumstances.

Recent Posts

Stories you will enjoy

Recommended reading