Question

(a) Announcing the revised minimum wages and conditions of employment acts in 2012, then Labour and Social Securities Minister Fackson Shamenda remarked, “…wages for various categories of workers have been revised upwards with domestic workers’ wages increased from K250, 000 to K522, 400 with transport allowance inclusive….these instruments cover vulnerable groups of employees who are not represented by unions.” Analyse the effect of these instruments on employment levels and total wage earnings.

Answer 1

Minimum wages are nothing but base guidelines for companies that employee people on the least amount of money which they may give to employees of the lowest working class.

Across the globe, numerous countries revise their minimum wages. The core reason for this is that they would want to increase the money available with this marginal group of people who earn meagre wages and live at bare minimums. Increasing their wages improves a countries poverty, living conditions and gives them proper access to modern facilities such as healthcare, education, nutrition etc.

In the current scenario, in the Zambian government, the wage rates are increased to achieve the above-mentioned outcomes. The effects of these instruments on Employment Levels and Total Wage Earnings is as follows: -

Employment Levels: -

Whenever an economy, chooses to increase the minimum wage rates, it risks unemployment in an economy. This is because we move beyond demand and supply to set prices for an item. As the price rises, the demand for labour force shrinks. These employees then become vulnerable to unemployment until the demand rises due to an increase in production capacity or a boom period in the economy.

The classic example is that of developed countries such as United States, in which companies started to outsource their tasks to countries such as India and China, where the cost of labour force remains extremely low. Thus, in the local environment creating fear and unemployment even when minimum wages were high.

Total Wage Earnings: -

Total Wage earnings for those people that currently remain employed will increase. This is because with a rise in minimum wages, employers have no option but to pay them higher and this increases their overall earnings and eases the situation for them.

They are then able to demand more goods and services in the economy, their lifestyle improves and they may then be able to have access to facilities such as education, healthcare, nutrition etc.

Please feel free to ask your doubts in the comments section.