Dr. Isaac Doku, an Economist and Lecturer at the University of Education, Winneba, has vented his disappointment in the government of Ghana in its decision to increase the base pay this year by 7 percent.

According to him, the government has not been fair to some workers because it has increased the base pay for certain categories of workers by ten times the percentage announced for other public service workers this year.

“The pay rise was mentioned in 2021, a period where the salaries of some increased by over 70 percent which has been the argument by most public sector workers. If the economy is broke, we should all bear the brunt”.
Dr. Isaac Doku

Dr. Isaac Doku therefore, backed recent calls by a section of the public that the government should revert to its previous system of adjusting the annual base pay based on the prevailing inflation rate.

Speaking in an interview with The Vaultz News, Dr. Doku explained that if for instance, the annual inflation is 12.2%, the base pay must also increase by 12.2% to maintain the same real wage saying, “we expect nothing less than that”.

“Your nominal wage (money income) must increase proportionately to price increase (inflation) to maintain the same level of real wage. If inflation rises more than the rise in the nominal wage, your real wage reduces. So employees will be worse off. Based on that, to help employees maintain the same standard of living and real wage, nominal wage (money income) should match increase in price (inflation)”.
Dr. Isaac Doku

Rise in base pay by 7 percent

It can be recalled that the Minister of Employment and Labour Relations, Ignatius Baffour Awuah, during the 6^th Quadrennial National Conference of the Ghana National Association of Teachers (GNAT) in Kumasi, stated that due to the negative impacts of the COVID-19 pandemic, government has decided to cushion public sector workers, so “the four percent will no longer exist and that we are going to give workers a seven percent”.

However, many public service workers argued that the 7% increment was still not enough due to the impact of the COVID-19 on households and the rising cost of living in the country. In response, experts urged the government to match the base pay increments with the rate of inflation in the country.

“That is very much expected; it is very right”, said Mr. Michael KaKu Minlah, who also thinks the rate of increment in salaries should correspond with the country’s inflation rate. Mr. Minlah, an Economist and Lecturer at the University of Professional Studies (UPSA), however, admitted that doing so “will greatly impact the wage bill of government but it’s a necessary trade off. We have to be concerned about the welfare of the government sector workers”.

Lower inflation to lower expectations for wage increases

Similarly, Mr. Kofi Korle, a Chartered Economist and Lecturer at the Central University College (CUC), who also backed the idea of matching pay increments with inflation, noted that annual wage increments should always take into consideration the rate of inflation in the country despite its impact on the government’s wage bill.

“This will ensure that workers are at least not worse off when average price levels are increasing. It will increase the wage bill to some extent. However, inflation could also boost government revenue mobilization so that the increase in wage bill may not put too much fiscal pressure on government finances. If the tax system is properly administered, episodes of inflation which would call for increases in wages can be met or financed by the increase in tax revenue mobilization”.
Mr. Kofi Korle

Mr. Kofi Korle, also speaking to The Vaultz News, explained that government should be able to afford pay increments once it is in charge of decision making that has consequences on the economy. According to him, if the government is able to keep inflation low, workers will also lower expectations for wage increases.

Compensation of employees remains one of the major expenditure components of government that consumes a chunk of domestic revenues. In 2022, government has earmarked a total of GH¢35.8 billion as compensation of employees, higher than the projected outturn of GH¢33.0 billion for 2021. This means compensation of employees will consume 36% of projected domestic revenues of GH¢99.5 billion in 2022.