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Wage bill analysis A Government cornered between a rock and hard place

“I want to say for emphasis I will not authorize any expenditure on wages and compensation not provided for in the budget,”

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Though the President Mahama- led administration may have spent, by far,  the most on salaries and emoluments, it appears to be the one hit by the  most strikes and labor unrest in  recent history in Ghana.

Since this government entered office in 2012, it has spent about GHC 16 billion to pay about 600 thousand public sector workers under the implementation of the Single Spine Salary Structure.  

Despite the fact that public sector workers averagely received sizable increments under this policy, the pay structure sparked a series of strikes by various unions.

The reason- they could not wait their turns to be rolled onto the pay policy. There were disagreements with government over categorization and market premium; in that, specific labour unions deemed themselves more important and valuable than others who may have been categorized in the same level. And once government could not downgrade any union according to the law, it had to bump many unions up.

The economy became the biggest sufferer. Ghana hit a recession it is still struggling to recover from.  Of course, economists argued that the wage bill was not the only reason for government’s financial strain, citing other issues like government’s undisciplined spending during the 2012 general elections which led to a depletion of the state’s coffers. But government spent 90 per cent of domestic tax revenue on salaries and 70 per cent of total revenue.

In 2013, government became desperate to minimize the wage bill,  so it intensified a ban on public sector hiring. This meant there was going to be no more addition to total public sector work force of over 600,000 unless to replace a retiree or deceased  worker.

This led to the stabilization of expenditure on wages, somewhat, as expenditure inched up  only a few percentages  due to unpaid arrears. All this while, there was still some labor picketing over some unpaid allowances and demands for better conditions of service.

The situation stabilized much further in 2014, when government adopted a combination of tactics to  rid the public sector of ghost names.  The 600,000 work force was believed to be heavily- laden with ghost names, who when removed will help the situation. So a combination of measures were employed including an extensive public sector biometric registration exercise for all government employees. This effort yielded a 13% decrease in the wage bill, signalling some respite to government’s coffers.

Government has signed an IMF bailout which requires it to consolidate expenditure. This according to the Bretton Woods institution is one of the sure ways of improving the country’s ailing economy. And one of the major ways identified,  is for government to stabilize the wage bill, and even reduce it in the most practical way as possible.

So far the IMF has been impressed with government’s commitment. But will it be for long, as the strikes resume with even higher demands?  With upcoming elections in 2016, can the president stick to his resolve not to throw the 2015 budget out of gear by sanctioning the release of funds to satisfy labor demands?
One thing is for sure though, with the numbers above, the consequences of succumbing will be a reversal to economic frailty we seem are already struggling to step out of.

Perhaps the president’s declaration that, “I want to say for emphasis I will not authorize any expenditure on wages and compensation not provided for in the budget,” says a lot about government’s resolve this time.

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