In an era where inequality threatens social cohesion and economic resilience, the living wage represents a bold step towards a brighter tomorrow
DOUGLAS RASBASH
Special Correspondent
Botswana, often lauded for its stable democracy and economic resilience, is facing mounting challenges that demand bold and innovative solutions. Rising poverty rates, high unemployment, and worsening social issues have become stark reminders of the need for urgent economic reform.
These serious social issues helped to usher in a momentous change in government. Recognising the problem, the incoming party, the Umbrella for Democratic Change (UDC), saw that one potential solution is introduction of a living wage. A living wage is high enough to meet the basic needs of workers and their families while fostering broader economic and social benefits. There is also a minimum wage which may not be high enough to become a living wage.
A special analysis prepared for The Botswana Gazette clearly shows that the minimum wage dotted blue line has increasingly lagged behind the rise in the cost of living – the dotted red line. The base year was taken as year 2000 where both the minimum wage and consumer price indices were set to 100. Evidently, the minimum wage in 2024 will only buy 40% the value of goods and services that it could in Year 2000. No wonder people are complaining and suffering!
Another issue is that the country’s unemployment rate is stubbornly high, hovering around 26%, with youth unemployment even more alarming. Increasing the living wage will only benefit those who are formerly employed. Social challenges, including rising crime rates and declining mental health, are exacerbated by financial insecurity. Against this backdrop, the introduction of a living wage could be a transformative step.
But what is a Living Wage? A living wage is not merely a legal minimum but a standard ensuring that workers can afford a decent quality of life. It considers basic living costs such as housing, food, healthcare, and education, adjusted to the local context. For Botswana, a living wage aims to address the gap between subsistence and prosperity, lifting many out of poverty while stimulating the economy.
Regional comparisons of living wages (mywage,2023 and wageindicator,2023) show that despite its high per capita income, the living wages for Botswana are relatively low, being around P4300 pm or $1.50 per hour. Nonetheless, the level of the living wage determined for Botswana is much higher than the P1500 minimum wage or $0.5 per hour.
The Economic Case for a Living Wage
- Raising wages directly boosts disposable income for low-income households, who are likely to spend the additional income locally. Studies from other regions indicate that a $1 increase in wages often leads to a $1.20 to $1.50 rise in local economic activity. In Botswana, this could translate into greater demand for goods and services, stimulating sectors like retail, transport, and small businesses. Further research is needed using monitoring data referred to below.
- With more than 20% of the population living below the poverty line, a living wage could significantly reduce poverty levels. Enhanced financial security often leads to better health, education outcomes, and reduced social unrest, contributing to a more stable society.
- A living wage fosters job satisfaction, leading to higher productivity and lower employee turnover. This is particularly relevant in Botswana’s tourism and mining sectors where retaining skilled labour is critical for maintaining competitiveness.
Challenges and Criticisms
While the benefits are compelling, implementing a living wage is not without challenges.
- Employers, particularly SMEs, may struggle with the higher wage bill. This could result in reduced hiring, layoffs, or shifts to informal employment. However, research suggests these impacts can be mitigated through targeted government support and phased implementation.
- Higher wages could lead to increased prices as businesses adjust to rising labour costs. Policymakers must carefully monitor and manage inflation to ensure the living wage’s benefits are not eroded.
- Industries reliant on low-wage labour, such as agriculture and domestic work, may face disproportionate challenges. Sector-specific interventions, such as subsidies or productivity-enhancing measures, are crucial.
The Impact of the 4IR
The Fourth Industrial Revolution and robotics will render many current jobs redundant and formal paid employment opportunities will be limited. Society will have to readjust to one where paid employment is no longer the norm. In this scenario, there will need to be a shift to having a universal basic income or UBI. There is already increasing discussion about UBI as providing the necessary liquidity needed for most individuals to live well but on unearned income. This is obviously some way off into the future, but the scenario cannot be ignored and legislating a living wage sets us on the path to UBI.
Policy Recommendations
To ensure the successful introduction of a living wage, the government should consider the following measures:
- A phased approach allows businesses to adapt, minimising disruption and ensuring a smoother transition. For example, the living wage could be introduced incrementally over three years to P4,300.
- Targeted support, such as wage subsidies, tax breaks, and access to affordable credit, can help small businesses absorb higher labour costs. Also, simplification of starting new businesses, including a five-year break from normal fiscal regulations.
- Government tenders awarded only to companies that pay a living wage. Companies should be certified as living-wage employers. Companies that pay living wages will stand out from those that do not. Paying a living wage will become a commercial imperative.
- Investment in skills training and productivity-enhancing technologies will enable workers to deliver higher value, making the wage increase more sustainable for employers.
- A robust monitoring framework should track the living wage’s impact on inflation, employment, and poverty reduction. Adjustments can be made based on these findings to optimise outcomes.
- Complementing the living wage with enhanced social safety nets, such as healthcare and housing subsidies, can further reduce the financial burden on low-income households.
A living wage should be part of a broader strategy to revitalise Botswana’s economy. Policies promoting value-added industries, regional trade, and green energy investment will create sustainable, well-paying jobs, reducing dependence on low-wage labour. Promoting inclusive growth by integrating rural and informal economies into the formal sector, Botswana can ensure that the living wage benefits all regions and demographics.
Introducing a living wage in Botswana is not just an economic decision; it is a moral imperative. While challenges exist, the potential benefits – reduced poverty, increased economic activity, and enhanced social stability – far outweigh the risks. By coupling the living wage with targeted support and broader economic reforms, Botswana can pave the way for a more equitable and prosperous future.
The new government must be mindful that introduction of a living wage was the main reason for their election success. They need also to be acutely aware that 64% of the electorate actually voted against them. Failure to deliver could therefore cost them very dearly at the next general elections 2029.
However, a good start has been made, that the Choppies Group is working on implementing a P4000 minimum wage, was confirmed by Major General Pius Mokgware, Minister of Labour and Home Affairs. This figure aligns with the levels indicated in the chart. Hopefully, others will follow this example.
In an era where inequality threatens social cohesion and economic resilience, the living wage represents a bold step towards a brighter tomorrow. It could be transformative and is not without risks, but it is a policy whose time has come.