Stable prices can make 5% pay rise worth more than 30% – Theo Acheampong

Dr Theo Acheampong, an economist and political risk specialist, contends that a 5% wage increase during stable economic conditions can prove more beneficial than a 30% rise in periods of hyperinflation. Speaking on Joy News' PM Express, he stressed that raising wages alone is insufficient to enhance living standards. He emphasized the importance of stable prices, dependable public services, and increased job opportunities as crucial elements.

According to Acheampong, if these factors are in place and maintain stability, a 5% pay rise is likely to better workers' purchasing power than a 30% rise in an environment with rampant inflation. His remarks highlight the significance of purchasing power in the wage discourse. A larger nominal increase does not guarantee that workers can afford more when prices surge rapidly.

Acheampong underscored that fair wages must be part of a broader strategy to bolster the economy and enhance everyday services. He stressed that the ultimate goal is a sustained improvement in living standards, which depends on fair salaries, stable prices, reliable transportation and public services, coupled with better job prospects.

The economist also advocated for a longer-term perspective on Ghana's wage bill. He noted that employee compensation has constituted between 25% and 35% (averaging around 30%) of total expenditures since 2008. While expenditure has been rising annually, its share of the total expenditure has remained almost constant. However, he highlighted concerns about its scale.

"But when you compare Ghana's wage bill to some of our peers, even within the subregion, you can see that the wage bill is quite extraordinarily high," Acheampong pointed out. He suggested that interest payments, compensation, and transfers to statutory funds leave little room for capital expenditure. "There’s actually nothing left to pay for capital expenditure," he said.

Acheampong argued that the wage bill discussion must also tackle productivity in both the public and private sectors. He noted that the government had signaled its 2027 budget would focus on growth, productivity, and job creation, aiming to foster quality employment that could sustain higher wages. For workers, Acheampong's primary argument was that the value of a salary hike is contingent upon the prevailing economic circumstances.

Higher salaries must be backed by stable prices to bring about enduring improvements in living standards.