Here is why Gov’t may not want to increase the Salary of workers by a high percentage [Opinion]
It is confirmed that the organized labour union has proposed a 60% increase in the base salary or pay of public sector workers for the year 2023.
The Ghanaian government, represented at the negotiating table by the Ministry of Employment and Labour Relations (MELR), the Fair Wages and Salaries Commission (FWSC), and other relevant institutions, rejected the unions’ proposal and recommended that organized labor accept an annual salary increase of 1%, or by adding 1% to the 2022 salary’s 7% and making it 8%.
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Organized labour rejected the offer made by the government. To win the hearts of the unions, it raised the bar by offering 12%, but organized labor has once again flatly rejected it.
Why does the government want to increase salaries by a small percentage?
The government wants to exercise liquidity constraints, which is the major reason why it does not want to boost salaries by a significant amount. They believe that the high inflation we are currently seeing is in some way due to an excess of liquidity, but this is untrue because the high inflation is actually brought on by a decrease in the supply of goods and services, not by demand driven by liquidity.
A liquidity constraint is a type of capital market flaw that places a cap on the amount that a person can borrow or changes the interest rate they must pay. According to theories of intertemporal consumption, it inhibits people from fully optimizing their behavior over time by increasing the cost of borrowing or limiting the amount of borrowing.