Low-cost Labour's Costly to Employees, Nation

Aug 14 , 2021
By Eden Sahle

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Last Tuesday, I was asked by a friend to support a private international company in an interview process. They wanted to hire a general manager shortlisted after passing oral and written examinations. The company, which started operations in Ethiopia not long ago, was impressed with the bright young man who exceeded everyone's expectations.

The young man was well experienced, energetic, confident, polite, and full of new ideas. The company stated their confidence in his capabilities and their willingness to hire him. Surprisingly, they offered a 3,000 Birr monthly salary. Obviously, the job applicant was staggered and declined the figure, thanked everyone, and quickly left the room in disbelief and visible anger. He did not even make a counter-offer.

I did not blame him. His stable emotional state and politeness, even when his face showed disappointment was commendable. The company owners turned to me, looking confused about what had just happened and said they had offered the job applicant a good salary for an experienced leader.

“We came to invest in Ethiopia because of the low-cost labour promotion your country has done,” they explained. They boldly continued, “do not get this wrong, but in our country, employees who have his experience and skill cost a fortune but not in Ethiopia.”

Then the owners asked me if I knew what might have driven the man to leave an ongoing interview.  All one needed to do was read his curriculum vitae. His monthly gross earning history records his minimum salary for a leadership position was 40,000 Br while his highest was 65,000 Br.

But the owners were quick to judge his CV. They were convinced he was lying about the figures. They were not bothered to confirm their doubts from his previous employers, whose contact address was stated in his application. When they were contacted, they verified the accuracy of his remuneration.

This sort of underpayment of employees is not new. It happens to all of us, although the extent might differ. Understandably, the nation is in a challenging position. With a fifth of the adult population unemployed, two-thirds of which comprises women, getting people something to do might seem like an immediate solution.  But this undervalues Ethiopia’s human capital. Constant advertising of low-cost labour to foreign investors leaves employees underpaid and overworked. Workers in the manufacturing and agriculture sectors are the hardest hit.

Most people work hard for an income that hardly allows them to get by until the end of each month. It is a tragic fact that many people work for half a century without saving because they are not paid living wages. And while living costs continue to escalate, the unchanging wages enabling people to support themselves and their families. Under such conditions, people opt out of the formal labour market and may even choose to support themselves through illegal activity. This decline in workers harms innovation in the workforce because not every eligible worker contributes to the workforce.

The right to an adequate standard of living is a fundamental human right. It should be the priority of the country to make it possible for people able to access it. The lack of legal minimum wages for the private sector mandated by the government is leaving employees subject to abuse and unfair pay. Ensuring fair wages is complex and demands continuous study and update as the cost of living rises. This requires systemic policy change to benefit people.

Collaboration between workers’ unions, employers and policymakers will play vital roles in creating an enabling environment to raise living standards through living wages and incomes and paying professionals a deserving amount that recognises their education level and experience. People have a right to ask for salaries that allow them to thrive, not just survive.

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PUBLISHED ON Aug 14,2021 [ VOL 22 , NO 1111]

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