While delivering the Budget Speech for Financial Year 2014/15 (In accordance with Article 155(1) of the Constitution of Uganda) on the 12th day of June 2014, the Minister of Finance Planning and Economic Development (MFPED), Hon. Maria Kiwanuka, announced that Shs 450 billion was allocated to enhance the salary of all Public Servants. This includes provisions for the teachers’ pay increase in line with Government’s agreement with the Uganda National Teachers’ Union (UNATU). The salary of the lowest paid teacher will therefore increase by between 15% and 25%. Other Public Servants’ salaries will also be adjusted within the available resources. This is good for the economy - going forward.

There is a tendency to think that improved salaries/wages for public and private workers constrain the economic performance of countries. Those who argue against higher pay for workers in both public and private sectors look at salaries through the prism of a burdensome recurrent cost stream that should be minimized if firms are to be efficient. Yet, better pay has potential to expand the fortunes of companies and governments through its ability to stimulate the productivity of the workforce. The other credible argument is that improved salaries are only desirable if they are matched by improvement in the performance of the workforce--there is more to this dominant narrative.

New York University economics Professor, William Easterly argues that higher wages for workers drive the aggregate demand and in turn grow the economy. I agree with him. Demand is the oil that lubricates the engine of any economy. We should therefore not be enemies of demand. When the middle-class or working class families can no longer afford to buy the goods and services that businesses are selling, the entire economy is dragged down from top to bottom.

I for instance visualize a teacher, health worker or administrator who gets additional wage in a locality - they will most likely buy consumer goods or invest in small and big businesses. This has a multiplier effect to the economy.

Far away in the United States, the revered Chief Executive Officer Henry Ford, a manufacturer of Ford brand of cars, made it his mission to pay his workers enough so that they could buy the cars they made. By doing so, the market for his cars began from within and stretched across all nations on earth.

Incentivizing the workforce through high wages/salaries requires a delicate balance based on rationalization, if we are to stimulate the morale and productivity of workers in the public sector. It is common knowledge that the wage structure of civil service in Uganda is confusing. There are some officials who even earn salaries or what some call ‘take-home” that are higher than what the President and Prime Minster of Uganda earn. Of course some of these distortions are explained under things like allowances, mileage, facilitation and severance, among others.

These distortions are not democratic. For example, teachers and nurses don’t have these allowances. Some people are asking legitimate questions like: Why are Members of Parliament earning ten times more than a teacher, yet most members of Parliament have either the same or inferior qualifications with their teaching counterparts. This is a genuine question that should be resolved by a wage restructured regime that looks at ingredients like qualifications, specialty and expertise, uniqueness of labour, labour demand, risk, working conditions and expected results among others. This kind of structure breeds equity and balance in the economy.

Allowances should also be rationalized. For example, data visualization by Advocates Coalition for Development and Environment (ACODE) shows that the Parliamentary Commission expenditure is shooting through the roof. From UGsh 82b in the 2008/2009 financial year, it hit UGsh280b in the 2010/2011 financial year and continues to grow.  A deeper drill into the datasets shows that many MPs are spending tax payers’ money on foreign trips without clearly showing the benefits of their trips to their constituents and the Country. Of course, some MPs file reports – but majority don’t do so.  MPs are entitled to an allowance of UGsh1.4m ($550) per day spent out of the country on official duty.

On the 21st of November 2011, the media reported that UGsh 8.5b was allocated to facilitate at least 300 of the 344 legislators on foreign travel for the financial year 2011/2012. In a space of just four months, UGsh 2.2 billion had already been spent on MPs’ foreign travels - an average of UGSh 550m per month. Whereas some MPs trips or other public officials are justified, travels should be streamlined to the national interest to avert bloating public administration expenditure and balance our wage bill.

By Morrison Rwakakamba

The author  [email protected]  is Chief Executive Officer – Agency for Transformation.