Omanghana
The Deputy Secretary-General of the Trades Union Congress (TUC) Ghana, Dr. Kwabena Nyarko Otoo, has attributed the country’s persistent low-wage structure to labor policies introduced during British colonial rule.
According to the labor economist, colonial employers deliberately kept wages low to maintain a continuous supply of workers. He argued that the approach became deeply embedded in Ghana’s labor system and continued to influence compensation policies after independence.
Dr. Otoo made the remarks during an interview on Joy FM’s Super Morning Show, where he discussed the widening gap between workers’ earnings and the cost of living.
He explained that British colonial employers believed Ghanaian workers had what they described as a “target mentality.” Under that assumption, workers entered formal employment only to earn a specific amount of money before returning to subsistence farming, informal trading or other economic activities.
Colonial authorities reportedly believed that if workers earned enough to reach their financial goals within six months, they would abandon wage employment for the remainder of the year.
To prevent that from happening, employers allegedly reduced wages and spread what workers could have earned within six months across an entire year. The strategy was intended to keep local employees dependent on wage labor for longer periods while guaranteeing employers a stable workforce.
“That is the genesis, and we’ve not been able to overcome it,” Dr. Otoo stated.
He said the system was built primarily around the labor needs of colonial employers rather than the welfare and economic security of Ghanaian workers.
Although Ghana gained independence decades ago, Dr. Otoo argued that the underlying wage philosophy was never fundamentally dismantled. Instead, the practice of maintaining a low base salary was carried into post-independence employment and compensation arrangements.
He suggested that successive wage policies had largely adjusted an already inadequate structure instead of rebuilding it around the actual cost of maintaining a reasonable standard of living.
According to him, low pay is not limited to a small category of vulnerable employees. The problem affects workers across several levels of the public and private sectors, including some of the people responsible for negotiating salaries and employment conditions.
Dr. Otoo said many workers’ take-home salaries are insufficient to cover basic necessities such as food, housing, transportation, healthcare, education and utilities.
He noted that even where nominal wages increase, workers may continue to experience financial hardship if the adjustment fails to match the cumulative rise in living expenses.
The labor economist also addressed public discussion about declining inflation, cautioning that disinflation should not be mistaken for a general reduction in prices.
A fall in the inflation rate means prices are rising at a slower pace than before. It does not necessarily mean that food, rent, transportation and other essential goods and services have become cheaper.
For example, a product that recorded a sharp price increase during a period of high inflation may continue to become more expensive even when the inflation rate declines. The pace of the increase may slow, but the higher price already reached usually remains.
This distinction, Dr. Otoo indicated, is important when assessing the actual conditions confronting workers. A reduction in headline inflation may improve economic indicators without immediately restoring the purchasing power households lost during earlier periods of rapid price increases.
He further raised concerns about market distortions in important sectors of the economy, including housing and domestic transportation.
According to him, some markets do not operate under sufficiently competitive conditions. Monopolistic and oligopolistic behavior can allow a small number of providers or influential actors to determine prices in ways that leave consumers with limited bargaining power.
The rental housing market is one area where workers face substantial pressure. High rents, advance-payment demands and limited access to affordable accommodation absorb a considerable portion of household income, particularly in major cities.
Transportation costs also have a direct effect on workers’ disposable income. Beyond the amount spent travelling to work, increases in transport fares often feed into the prices of food, services and other goods distributed across the country.
Dr. Otoo argued that workers cannot be expected to resolve these challenges through wage negotiations alone when the prices of essential goods and services are influenced by weak competition and inadequate regulation.
He called for effective state intervention to monitor pricing practices and protect consumers against excessive charges in critical sectors. Such intervention, he explained, should address market failures without undermining legitimate business activity.
He also advocated a fundamental restructuring of Ghana’s wage system, with greater attention given to the relationship between base salaries and the real cost of living.
Rather than relying mainly on periodic percentage increases, policymakers and social partners must assess whether the income available to workers can reasonably meet their essential needs.
Closing the gap between wages and living costs, he said, would require coordinated action involving the government, organized labor and employers. It would also demand broader policies covering affordable housing, reliable public transportation, social protection and the prices of essential services.
Dr. Otoo’s comments add to continuing calls for Ghana to move beyond a historically low-wage economy and adopt a compensation system that promotes decent living standards, productivity and economic security.
His position is that Ghana’s wage challenge is structural and cannot be resolved solely by improvements in headline economic indicators. Without reforming base incomes and addressing distortions in essential markets, many workers will continue to struggle even when inflation slows or the wider economy records growth.
Source: Omanghana
