BOFEPUSU wants protection against inflation

Oarabile Mosikare | Friday February 21, 2014 16:33

In a proposal on public worker’s pay, incentives and allowances, BOFEPUSU said the high inflation rate due to the increase in some administered prices, namely public transport fares, electricity tariffs and fuel prices has led to a decline of real salary value. The federation argued that this high inflation can therefore be mitigated by incentives, allowances and better pay.

“This is to compensate employees for work they do, to motivate them to perform well, to retain them, and hereby avoid the need for expensive recruitment and training for replacement,” BOFEPUSU argued.

In the paper, BOFEPUSU wrote that for the past five years, when government made adjustments to public service salaries, the inflation rate was always greater than the salary adjustment rate. The only exception was for the year 2008/09 and 2010/11.

“This shows that real wages eroded over time due to this high inflation. Inflation averaged 7 percent during July-September 2012, down from last year’s average rate of 8.5 percent. This implies that the real wages would still be eroded significantly even with a 3 percent adjustment provided in October 2012.”

Taking into consideration the budgetary constraints, BOFEPUSU proposed a partial inflationary adjustment.

“Given that the inflation burden is heavier on lowest paid; we propose a differentiated salary increment with a lower increment of 3 percent at the top and a higher rate of 30 percent for the lowest scale A. The proposed differentiated increment will increase as we go up the scale in a pyramid style of application. In other words, up to 30 percent can be applied at the bottom scales and allow for reduction in the rate of increment as you go up the salary scales, with the top scale only getting 3 percent.”

The federation said although this proposal has effects of slightly distorting the pay differentials between bands, it has the desired effects of compressing the pay differences between the highest and lowest paid. In the proposal BOFEPUSU said: “Botswana has one of the highest income inequalities in the world especially when compared with other middle-income countries, with a Gini index in excess of 0.5. Inequality has been identified as a major factor that leads to a stagnant economic growth.”

The federation said despite budgetary constraints, there is a need to protect the real income of workers from inflation over time. Better allowances and attractive incentives can be used to complement or reward the public sector employees, BOFEPUSU proposed.