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No room for PDL

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The debate about whether or not basing salaries on the poverty datum line (PDL) is the correct measure by which companies should remunerate employees has intensified.

Below is the Zimbabwe National Chamber of Commerce (ZNCC) president Oswell Binha’s position on the use of PDL.

The current debate on the feasibility of and the demand for PDL-related remuneration has no place in a liberalised economy. Many variables come into play, one of which is the bipartite relationship between employer and employee.

Companies have since grown mature to regard their employees as equal partners in business, hence the popularity of employee share ownership schemes.

Some employees have grown past PDL debate due to the attractiveness of productivity-related remuneration.

Historically, the labour market engaged employers on an “employer-employee” basis and this has since seen a gradual change with the development of effective internal negotiating structures at company level.

However, there is an economic misconception that wages should be based on the PDL or the cost of living. This is technically incorrect.

Wages are determined by the level of productivity and working conditions.

The PDL is thus an external variable outside the labour equation and has no relationship with the wage rate.

Agreed, the majority of our workers are earning wages below the living wage, but more importantly the levels of productivity are very low.

The effects of paying wages beyond the productive wage are the same as those of price controls, they will simply drive the company out of business.

The solution to this matter should be at the market subsidies, where the government subsidises the final product to reduce the burden on the consumer.

What is also critical is also for the government to relax the labour laws, in order to allow companies to rationalise their labour requirements in line with the current low capacity levels and changing business models

In any case, the country has to be competitive and certainly labour rates continue to militate against the ability to ensure correct levels of competitiveness.

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