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Facing the living wage challenge in Ethiopia

14 April, 2016For Ethiopian unions, the achievement of living wages for their members is a key goal if the country’s development objectives are to be met, including becoming a middle-income country. Yet the mechanisms that unions could use to achieve this goal, namely systems for establishing a minimum wage or conducting industry bargaining, have yet to be developed in Ethiopia.

At an IndustriALL Global Union workshop in Addis Ababa on 11-12 April supported by the FES, affiliates from the textile and garment, chemical, electrical and mining sectors met to consider the first steps that need to be taken towards developing comprehensive and effective wage-setting mechanisms in the country.

Affiliates were keen to learn from the experiences of unions in other countries. They heard how minimum wage systems in countries such as Cambodia and Bangladesh have proven to be inadequate to raising wages up to the level of a living wage.

In order to better understand which systems the unions in Ethiopia should be working towards, there was a substantial discussion on the potential advantages and disadvantages that a national minimum wage mechanism as well as industry-wide collective bargaining could bring to Ethiopia.

Affiliates see a national minimum wage as setting a benchmark for wages that cannot be undercut by employers, is enforceable by law and ensures that even workers at companies with less economic power get the same wage.  A national minimum wage would demonstrate the commitment of the government to improving workers conditions and would also contribute towards tax accountability and transparency.

Drawbacks of the system include that workers are not involved in setting the amount, there is no flexibility and the rate may not keep pace with inflation. There is a risk that employers will not be prepared to pay above the minimum, including those with better economic performance.

Jenny Holdcroft, IndustriALL policy director said:

Industry bargaining has certain advantages, primarily that workers have a say in the outcome. Collective agreements were seen as having a positive impact on quality and productivity as they are based on trust and negotiation. There is flexibility to reopen agreements and industry-specific workload, skills and other issues can be taken into account. Importantly, industry bargaining helps build union power to negotiate.

However, it will take time to achieve such agreements when there is currently no system for it, and work needs to be done to increase union power. Both systems were seen as important for creating stability in the industry and certainty for workers and investors.

Ethiopian affiliates agreed to continue these discussions and to engage with the confederation and the ILO to take further steps towards developing wage mechanisms.

Meanwhile, the unions continue to fight for their members and there have been several successes in achieving significant wage increases for members through collective bargaining with individual employers. For example, at the Ayka textile and garment factory, the union has been able to increase the basic wage from 600 to 990 birr and at the Bahirdar factory they have achieved 915 birr, but both unions acknowledge that these increases are still not enough for workers to earn a living wage.