Minimum wage, better pension good for Rwandan economy

Tuesday October 3 2017

Workers in a textile factory in Rwanda. Photo by Cyril Ndegeya

Workers in a textile factory in Rwanda. When employees are not paid adequately they lack motivation to do their best work. PHOTO | CYRIL NDEGEYA | NATION 

By MOSES K. GAHIGI
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New research by the Rwanda Federation of Trade Unions (Cotraf) shows that a regulated minimum wage and improved pension benefits for retired citizens would benefit the economy.

“If there is minimum wage in place, workers will earn better wages and will spend on consumer goods. The money would go back into the economy,” said Cotraf secretary-general Gasore Seraphin.

The research was based on a 2014 survey in which Cotraf proposed Rwf126,000 ($149) as the minimum wage for those employed in urban areas and Rwf87,000 ($102) for those employed in the rural areas.

The current minimum wage of Rwf100 ($0.12) per day was set in the 1980s.

Mr Gasore said the study showed employers lose value because workers are not motivated as a result of not being paid well due to lack of a minimum wage.

He said the new study gives examples of the negative impact of lack of a minimum wage on the economy, and the benefits for countries that have a balanced minimum wage.

On how the proposed minimum wage will be financed, Mr Gasore said their studies show the economy can sustain it. Pension is calculated according to how much an employee earns, so the minimum wage is a determining factor on pension benefits.

In a recent interview with the former minister of labour Judith Uwizeye, she said the ministry is working on a new labour law, which will be the anchor for the minimum wage.

She said the existing law doesn’t take care of the informal sector yet it has the biggest number of people who are affected by the lack of a minimum wage.

The research also proposes sector-specific minimum wage, where for example those working in high risk jobs get more money.

“The minimum wage should be sector specific” said Mr Gasore.