Dollarisation: The worker's perspective

DOLLARIZATION: THE WORKERS’ PERSPECTIVE AND PLIGHT
Prior to the establishment of the coalition government and the dollarization of the economy, the economic situation was very dire; the whole system was literally not functioning so it was a relief when the political agreement was consummated. One of the immediate task of the new dispensation was to institute a series of acts and legislation that formally recognised dollarization as the short term panacea to the economic malaise and the eventual setting of the US$ as the country’s base currency. Indeed there was an almost immediate impact because the business environment now allowed even the closed companies to reopen or to improve operations and in some cases companies started to relook at some long term expansion projects that had been shelved over the last decade. For workers dollarization in particular brought home a welcome relief, the food shortages, currency shortages that had become a part of life in the years preceding the new government were gone and most basic goods and services became widely available once more. Inflation which had been labelled the country’s worst enemy was out of sight as it now averaged just fewer than 5%a far cry from the 200 million per cent it was when the economic recession was at its climax and this perhaps was and is the most significant thing to have happened since the coalition government. Economic growth which is indicative of the improving production and productivity has been positive since and this year it is estimated at 9%nearly twice the regional average. However the initial cheers associated with the coalition seem to have given way to complains and protests against among other things the apparently stagnant wages which have remained well below the estimated poverty threshold of about $500 per month. Unions have repeatedly demanded the improvement of working conditions particularly wages charging that workers are again being left behind because a number of companies have since returned to profitability and senior managers are more comfortable yet there has been little or no movement of the salaries and wages of the rank and file. Employers offer a number of reasons for failing to pay sustainable wages and the whole situation threatens to spiral out of control because many workers’ unions have issued notices of strike if their demands are not met. However in this article I seek to underline the importance of well paid workers in the economy particular ours which is emerging from nearly 10 years of economic decline. During this decline the economy lost one fundamental group, a group which in normal circumstances drives the economic growth of a country, the middle class. A middle class is essentially a group workers earning an income which is at least above the poverty threshold hence in our case anything above $500 per month and this group may also include small businesspersons and traders. Middle income earners help to drive the economy forward because of their propensity to spend not only on basics but semi-luxury items as well and this helps to ensure economic stability during times of international recession. In fact the world’s major economies nations are known to be spurred largely by internal demand, effective demand which is only achievable when the middle class earns highly. For instance the United States, the world’s largest economy is known to be driven largely by consumers- some estimates conclude that nearly two-thirds of that economy is driven by consumer demand hence the association of that economy with theory of consumerism. Now this is quite possible if nearly 50%of the entire population there believes they are in the middle income class and that is why the government there has placed a lot of emphasise on helping this class ride out of financial ruin brought by the world recession. Japan the near perfect economy actually surpasses even the US because 90%of the population in Japan believe they are in the middle class and this may partly explain why such a tiny island nation grew economically to become the second richest economy in the world despite it not having a lot natural resources. In fact this is principally the same situation for the rest of the world’s dominant economies and really points to this as the best way of achieving the ambitious goal of a $50 billion economy that officials having touting recently.  Granted we already have an educated, skilled and literate labour the majority of which are in the civil service and of course the private sector and authorities are quite aware of this hence in our case paying a sustainable a wage could not only pre empt industrial action but could also set the ball rolling in efforts towards resuscitating the middle class. However the government has said it cannot meet the wage demands of its employees because it is not collecting enough revenues and apparently its present wage bill is about 70% of its collections and certainly this is not sustainable. The government has not received direct aid, loans or funding and it has had to rely on its collections- a cash budget and now since we use the foreign currencies, the one option though an inflationary one which most governments use in these circumstances the printing of money is not possible. So really it is a dilemma because you have an underpaid labourer demanding legimately so for an improvement in earnings from current levels to levels that at least pulls him outside the poverty bracket. On the other hand you have an essentially crippled government at least according to publicly revealed revenue collection figures, a government that cannot afford to pay its own workers. The private sector employers also cite liquidity problems for their failure to pay adequately though sometimes employers claim to be hamstrung by these problems yet go on to award themselves very generous packages and this fuels the mistrust and animosity as we see it. While aid and loans from multilateral lenders can only flow into the economy once certain standards of governance and other issues have been met it is imperative that all stakeholders understand the bigger picture here, rebuilding the middle class to achieve long term stability. One way to do this would be to enter into an agreement, a social contract of some sorts. For instance employers may have to make the sacrifice by giving in to labour’s demands now and in return labour will have accept that it will not ask for further increases during an agreed period and this has to be a binding on everyone. However this can only happen in an environment where there is communication and mutual trust perhaps that should be the starting point.

Terence Zimwara

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