Study on wage determination and labour costs in Africa

Abstract

The wage question remains a central issue in Africa's socioeconomic development, significantly impacting income levels, distribution, labor productivity, and production costs. Wage rates directly influence employment levels, income distribution, and national output. However, Africa has experienced a sustained decline in real wages and a compression of wage structures, raising concerns about worker motivation and effort. The fair-wage hypothesis suggests that declining real wages lead to reduced effort, as workers struggle to meet basic needs. The paper examines trends in nominal and real earnings in Africa, highlighting the dramatic decline in real wages during the 1980s, exacerbated by inflation and structural adjustment programs (SAPs). Wage compression has disproportionately affected highly skilled workers, while lower-grade workers have seen relatively higher nominal increases. The wage determination process in Africa is influenced by institutional, social, and market factors, with civil servants often faring worse than private-sector employees.