Minimum wage policy: Key to ensure sustainable livelihood in Ethiopia

Setting minimum wage is key to ensure sustainable livelihood and attract quality investment to Ethiopia, as noted in a discussion jointly organised by the International Labour Organization (ILO) Country Office in Addis Ababa and the Embassy of Belgium in Addis Ababa earlier this year.

Alexio Musindo, Director for the ILO Country Office for the Horn of Africa countries, said, “some years ago, it was a taboo to discuss minimum wage but now we can have the discussion. With a discussion around minimum wage, we are looking at people’s livelihoods and investment of billions of dollars.”

“This year we are celebrating 100 years since Ethiopia joined the ILO, so we need to discuss how far we come in terms of solving social issues, attracting quality investment, and boosting productivity for Ethiopia. We should think about how we can alleviate inter-generational poverty through a good minimum wage policy,” added Alexio.

Stefaan Thijs, Ambassador of Belgium to Ethiopia and Djibouti and Permanent representative to the African Union, on his part said that the reduction of inequality and the promotion of decent work for all women and men have been identified as key objectives in the 2030 Agenda for Sustainable Development.

The Ambassador added that the Embassy is working with the Ethiopian government to implement the existing policy towards it. He said, “in Belgium, we have the tripartite social dialogue culture, and we also are a founding member of the ILO so the issue of minimum wage is an interesting topic to us, and we would like to share our expertise around it. We have to make a big cake in Ethiopia, a cake of prosperity, which is not just focused on the economic growth but also on the social development.”

Presenting a research report on the forum, Patrick Belser, Senior Economist and Wage Specialist at ILO said, “well designed minimum wage can contribute to overcoming poverty and reducing inequality.”

He added that minimum wage protects workers against unduly low pay as a result it helps to ensure a just and equitable share of the fruits of progress and overcomes gender inequality in workplaces.

Ms Kathy Marshall, General Manager of Sabahar PLC shared her experience of wage setting at Sabhar, a manufacturing company working for about 19 years in the garment sector in Ethiopia.

Ms Kathy said, “We have been working with the ILO for many years and they are a great partner. We believe our existence is related to peoples living conditions and we take the issue of wage as a very serious issue. It is very important to us, that employees have a sustainable livelihood. They have stability in their family and life.”

“Sustainable livelihood is the number one reason why we have Sabhar. There is no minimum wage policy in Ethiopia that we can rely on so that we started to do it ourselves. We do our own survey among non-management staff. We talk to our employees and ask them how much they are spending on food, rent, education, etc. so that we will be able to identify what is the minimum our employees need per month to make a healthy livelihood and adjustments to our salary structure. What should we be paying to people for them to have good life. With this in place, we have almost zero turnover. Staff turnover is a huge cost”

Kathy added that, “when we invest in our staff, it’s unlikely for people to leave. They have stable families, their children go to school, staff are healthy and that’s a huge contribution to the economic stability of the people and the country as a whole.”

Mr. Theodros Getahun, Human Resources Manager at Puratos, a food processing company, also reiterates the same. 

“People are critical for our company so we should be people-centric in our approach. We have been investing on trainings, compensations, benefits, awards, etc. we have a standard guideline for benefits and compensations. We consider inflation, living costs and employee performance during the revision of salaries annually so that we make sure we make sure people are getting paid an amount that covers at least their basic expenses,” Theodros said.

Kidist Chala, Head of ILO’s Textile and Apparel Programme said, “as ILO we are ready to continue providing technical and financial support to the government to establish a wage board.”

According to ILO’s labor force surveys, there were about 40.5 million workers in Ethiopia in 2021, including 23 million men and 17 million women. Wage employees represent 46 per cent of workers in urban areas and only 5 per cent of workers in rural areas, while 48 per cent of wage employees work in the public sector, and the other 52 per cent work in the private sector. Wage employees represent 60 per cent of workers in manufacturing, but only a per cent in agriculture.