Ghana will go to the polls at the end of 2020 to elect the next President and Parliamentarians. As one of the common themes in the political debates, unemployment and wages will feature in the race for the Jubilee House.

The unemployment rate in Ghana currently stands at 6.8% of the total labor force (World Bank, 2019). About 5% of the total labor force with advanced education are unemployed (World Bank, 2019).

In comparison to other developing countries, Ghana’s unemployment rate is promising. However, there is a need for sustainable national policies to reduce unemployment and raise the standard of living of Ghanaians.

One critical area is our minimum wage policy which is incommensurate with the necessary living expenses of citizens. The necessary living expenses or cost of living is how much money a person actually needs to get by and have a decent accommodation, food, clothing, pay bills and support personal and family growth.

The current minimum wage (MW) in Ghana is about GH₵11.82 per day (i.e. £1.58 per day). Although many Ghanaians earn above the daily minimum wage, very few jobs pay a living wage (i.e. a wage corresponding with actual ‘necessary living expenses’). Some jobs also pay less than the current daily minimum wage.

Figure 1 shows an estimated ‘necessary living expenses’ for single adults based on interviews with young graduates from major cities in Ghana. This suggests that the average cost of living for young adults in major cities is about GH₵1,495.

Using the figures above, an appropriate hourly minimum wage for young adults is about GH₵9.34 per hour.

The hourly rate could be revised for different regions, cities and towns based on the actual living expenses or cost of living. The hourly rate can then be increased by considering the level of abilities, knowledge and skills required for specific jobs. Such a policy will raise the living standard of the average Ghanaian and help resolve unemployment and the disparity between wages and living expenses.

I believe this economic incentive will encourage young people to take general jobs (work that require low skills). Secondly, such an hourly minimum wage policy will drive employers in the public and private sector to make prudent decisions to cut wastage of resources and drive a focus on efficiency.

Hourly minimum wage policy case example

The UK, as an example, runs a national minimum wage of ~£8.21 per hour (i.e. GH₵61.21 per hour) for adults aged 25 and above. This economic incentive motivates most people to work as a general or casual worker, particularly immigrants and students.

To inform this article, I interviewed several Ghanaian students in the UK who provided insights on how they have benefited from the UK minimum wage policy:

I am a self-funded student at […] University. I think the minimum wage policy in UK should be a model for all Governments that are really serious and keen on improving the economic well-being of their citizens. I have been able to support my parents in my accommodation and maintenance expenses by taking part-time general work and casual work, such as a food delivery, waiter, security officer, shop keeper, cleaner and carer because of this incentive. (PR4)

Overall, most of the students provided favorable views about the UK policy, emphasizing that they are able to “earn something substantial to support their education, living expenses and fees because of this policy” (PR5).

Of course, the implementation of this policy in Ghana will come with challenges at the initial stage. However, this hourly minimum wage policy may be beneficial for both employers and employees in the long term.

Firstly, most general work in Ghana will be viewed positively and respected, and encourage young people to consider specializing in such areas. This, I believe, will expand job creation, innovation and career development beyond the traditional professions, such as Medical Doctor, Nurse, Lawyer, Higher Education Academic, Teacher, Administrator, Engineer, Police or Military Officer.

Secondly, employers will be critical about their business operations and develop strategies to minimize waste of resources and maximize their efficiency.

I believe it is really important for a national debate on implementing an hourly minimum wage based on actual living expenses of citizens to help resolve unemployment issues and the poor salary/wage structure in Ghana.

In summary, there should be a reasonable consideration of the actual living expenses of citizens to define wages in Ghana.