
Inflation & the issue of salary adjustment
We have heard the debate on salary adjustment that has ensued in our Parliament not very long ago. As a non-economist, I was raising in my mind, while the debate was going on, whether the issue could hold water at this particular period of the country’s nascent economic revival.
While accepting and appreciating existing organizations to increase salaries of their employees as per their salary scales, the question remains whether salary adjustment all across the board should be a discussable item under the prevailing circumstances. The question should have been, would salary increment for some members help improve the living conditions of the Ethiopians in general and that of the people of Addis in particular?
It is not surprising for an economy that has been under strenuous and stifling war conditions to go through a chain of inflationary situations in its attempt to come out of such slump. Ethiopia has been in such condition for a long time until recently when it embarked upon implementing its revival economic policy. Yet, inflation is not discriminatory; it knocks at the door of every citizen, while salary adjustment is discriminatory. Salary increment may cover temporary problems of some people.While a good deal of the population remains scrambling through the impact of inflation, only a few may manage to survive the hardship and the price hike because of false and temporary arrangement of salary adjustment. Was this the way the ultimate decision-makers thought about it? Of course, it was not. The good thing was and which helped the decision-making process indeed, that there was always counter argument for every argument as there is an anti-thesis for every thesis.
By way of an example, Great Britain had her crisis during the Second World War. But, for an already economically developed nation, like Britain, recovery efforts would not take that long. It was back on full employment as the dominant aim throughout the post-war years has been such. Yet, when one talks of full employment in England then, one should not be surprised to find unemployed people relatively as close as half a million odds.
But, did Britain, already an advanced economic power, solve her inflation by only satisfying a section of the salaried white-collar workers. What was the plight of the non-salaried people in the light of the rising cost of living like the wage-earners, the self-employed individuals, and the people living on annuities or pensions which were the same, in money terms, as before the war? Obviously, they were bearing the brunt of the subsequent increases in the cost of living, but, the solution to alleviate the inflationary situation was total but incremental.
But, luckily in England even before the war, economic inequality was less than in many other countries. Yet, inflation was not controlled arrested by merely increasing the white-collar workers’ pay. It had to be treated with caution. It had to increase its exports by more than a quarter of its output of goods and services, changes in the terms of trade account had to be maintained to a considerable extent to alleviate the comparative hardship of the early post-war years and which became instrumental for the growing prosperity that followed.
The post-command economy and internal war situation in Ethiopia, by the same analogy, needs cautious approach. It is true that the real incomes of most wage-earners have nearly doubled, while at the same time the income of some farmers has started to increase. Nevertheless, since the real national income is low, mere salary-adjustment for a segment of our society does not solve the prevailing economic hardship unless real personal income per head shows proportional growth.
So, at a time where the many Ethiopians have little or no pension scheme and where there is no reliable life insurance or social security system, or health or educational coverage, to advocate on salary adjustment for only a segment of the society may not be rational and a practical solution at that to our current problems. Though one should not take the proposal as totally negative, advance caution should always be there lest one falls into difficulties. It may even aggravate the inequalities further.
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