Wages increasing in ZWL terms but show USD decline – CZI report shows

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By Alois Vinga

UNITED States dollar denominated wages have sustained significant declines except in just one sector, a Confederation of Zimbabwe Industries (CZI) report on the Analysis of Collective Bargaining Agreements (CBAs) has revealed.

The report shows that salary increases have not been following a consistent pattern, reflective of key economic fundamentals.

“In US$ terms, there was a sharp decrease in wages in all the sectors except the Electronic, Radio, TV, Manufacturing and Allied sectors, where wages were increasing every month in both ZWL and USD.

“In the urban and rural cotton industry, wages were increasing in ZWL terms but falling in USD terms.

“The fact that the minimum wage is generally decreasing every month in US$ terms simply means that the ZW$ is failing to keep pace with the exchange rate movements of both the official and parallel market. Exchange rate instability is, therefore, a threat in the CBA processes,” the report said.

Based on the official exchange rate, the industry lobby group said Zimbabwe’s minimum wage in the agriculture sector is higher than Tanzania and Zambia, whereas the rest of the select SADC countries have a higher minimum wage compared to Zimbabwe.

“However, when using the parallel market rate, Zimbabwe becomes the country with the lowest minimum wage of $34 as at March 2022. Since prices are indexed to the parallel market rate, an average Zimbabwe consumer is worse off and more vulnerable to poverty compared to counterparts in the other SADC countries,” said the analysis.

The analysis has generally revealed that over the period of January to March, all sectors real wages were generally decreasing as the increase failed to cope with the rising inflation.

“Given that the main inflation drivers are rentals, bread and cereals, vegetables, meat as well as fuels and lubricants, which are basic with inelastic demand, the average worker is vulnerable,” the report said.

The industry lobby group noted that house rentals are mainly charged in foreign currency and payable based on the parallel market exchange rate at the time of payment.

However, the analysis has revealed that in US$ terms, the minimum wages were actually falling.

Constant rising inflation and a constant shrinkage in wages result in consumers often adjusting their purchasing behaviour and spending less since the value of their disposable income would have been reduced.

“This effect of decreased purchasing power can lead to a decrease in overall consumer spending around the country, thus reducing aggregate demand. As a result of a fall in aggregate demand, output decreases, as well as GDP,” said the report.