Latest Update on remuneration in Ghana: Ghana’s formal sector workers’ salaries decreased by 12% in 2022 although their salaries went up per the agreement in 2021.
Every year, Ghana Trade Union Congress (TUC) together with Government and other employers negotiate the rate/percentage by which workers’ salaries should be increased especially those employed by the government.
The annual salary is mostly pegged at a given percentage increase based on projected or actual inflation and depending on when the negotiation is taking place.
The percentage increases in salaries are meant to offset/cancel the effect of inflation on the salary which reduces the value of the money or reduces what the previous year’s salary can buy.
The increase in the salary, therefore, means the worker can still purchase the things he/she used to buy.
However, anytime the increase in salary is lower than the inflation rate, it makes the worker worse off because he/she can no longer purchase the same quantity of things he/she used to buy even though the amount/quantity of money has increased
For the first over decades in 2021, two different years percentage increase was determined in one year together. Interestingly, at the time the negotiation was ongoing, the previous year ended with an inflation of 10.4% in December 2020.
The agreed percentage increase for the workers was 4% for 2021 and a 7% salary increase for government workers for the year 2022 however, the year 2021 ended with an inflation of 12.6%.
The implication for the government workers is that, while they got 11% salary increase for two years (ie 4% +7% = 11%) the cumulative inflation for the preceding two years is 23% (10.4% + 12.6% = 23%).
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It is therefore clear that total inflation is more than total salary increase by 12% (ie 23% – 11% = 12%).
The underlying point is that the purchasing power of salaries (value) for public sector workers has been reduced by 12% even though the amount/quantity of money they receive has increased.
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Understanding this phenomenon should be a guide for everyone especially when they begin to feel their monies are disappearing or not adding up.