Dr. Kwadwo Opoku has proposed a nationwide cash transfer system to cushion citizens against the rising cost of living in the country.
The Research Fellow at the Centre for Social Policy Studies (CSPS) at the University of Ghana said such a scheme will lessen the burden on the poor and vulnerable in society and its administration cost to government will also be less compared to a targeted system such the Livelihood Empowerment Against Poverty (LEAP) program.
Dr. Opoku indicated that the scheme will be more impactful because the rising cost of living is being felt by all and even though the amount to be given out may be insignificant to the non-poor, to the poor, “it is a very good thing for them”. He indicated that the poor people are mostly being affected by the increase in transport fares since they do not own their own cars as rich people do.
“The best way is for the government, especially given our ID card system, to as a matter of urgency, get a redistribution transfer system for workers. But remember, what is also problematic is that the inflation rate does not affect only the government workers, so even if they succeed, what about the private workers? They will not get that opportunity and Inflation affects everybody.
“In terms of inflation, the poor are the people that loses the most. It’s not only that inflation takes away purchasing power, but also affect planning, especially workers, how they can plan well, it is not good. The best way to do is to make sure that the poor people will not disproportionally suffer from the high rate of inflation. So to do that, we need a redistributive vehicle, welfare system. It was going to be expensive when we do not have a good ID card system but right now, with a good ID card, with just a click”.
Dr. Opoku
Dr. Opoku told the Vaultz News that government can team up with AirtelTigo and issued a directive for all citizens to get accounts to aid the transfer since government owns majority of the shares in that company.
“What that means is a mobile money account for each ID card. And with that one, anytime there is a problem, you can transfer any amount that you think is good, at least, it can serve the poor people”.
Dr. Opoku
Need for inflation adjusted wage
The Senior Economist noted that if government pegs the wage rate against the rate of inflation as has been suggested, it will only benefit government workers and leave out the majority – private sector workers and the poor – who are most vulnerable to the recent economic hardships.
“I think they are talking about inflation adjusted wage so that anytime inflation increases, workers’ wages will be adjusted by that. That sounds good but I’m not sure if there is any country with that structure because employers, just like government, sometimes want to benefits from money illusion. It’s going to be very difficult for government to meet the salaries of workers because they usually take advantage of it.
“Remember, when we say inflation is 23.6%, there are people who are not facing the 23.6%; there are geographical disparities in inflation. So, I don’t know, of course, we can say you find the average or maybe on a regional basis but I don’t think the government is going to do that because it is going to be very difficult for the government; that means every time there is inflation, the wage bill has to be adjusted. And remember, government revenue is not also adjusting by inflation as we are talking about, so, it is going to be very difficult”.
Dr. Opoku
Dr. Opoku explained that employers usually benefit when there is high inflation because they change the prices of their goods but the wages are contracts which can only be reviewed after a certain period. This is because parties to the employment contract usually use inflation expectations in their wage negotiations and not actual inflation.
“So, it’s a structure that is going to be beneficial to employees but I doubt, the government cannot afford. As a worker, it’s a good suggestion but I’m looking at fiscal framework. The government will not be convinced by that, even if it’s convinced, it’s going to be very difficult for it to be credible”.
Dr. Opoku
National year-on-year inflation stands at 23.6% at End-April 2022 but the Economist told the Vaultz News that he expects inflation to continue to rise albeit marginally in May as transport fares have been increased by 20%, in addition to the announced increment in utility tariffs.
Dr. Opoku however, does not expect the Bank of Ghana to hike the policy rate in its upcoming meetings because most of the factors driving the recent inflation are not domestic and are therefore, supply side factors. He indicated that hiking the policy rate may not be the solution to the rising inflation.
Dr. Opoku’s comments followed the rising cost of living in the country which currently saw inflation rise to a 19-year high since April 2003. Amid the high cost of living, organized labor is calling for a living wage in addition to calls for government to peg wages against the rate of inflation of inflation in the country.
READ ALSO: The ‘Youth in Innovative Agriculture Programme’ to benefit 24000 Ghanaians
