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Study to inform the selection of an appropriate wage rate for public works programmes in Malawi

Ephraim Chirwa, Anna McCord, Peter Mvula, Caroline Pinder
Contact: amccord@iafrica.com

31 May 2004

SARPN acknowledges permission from the Government of Malawi's National Safety Nets Unit for permission to post this paper.
The views expressed are those of the authors.
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Executive summary

This Study was commissioned by the Safety Nets Unit of the Government of Malawi in order to explore the concern raised by PWP workers, implementing agencies and donors that the wage rate paid by public works programmes in Malawi may not be consistent with the policy objective of improving livelihoods1.

The specific objectives of the Study were;
  • To develop a replicable and robust process with clear criteria for determining an appropriate wage rate;
  • To provide recommendations for a revised wage level;
  • To review the objectives of PWPs in relation to the need to address longer term livelihood promotion.
A two phase methodology was adopted. The first phase involving data collection based on a literature review, key informant interviews, and focus group discussions with programme participants, and the second the analysis of the data gathered in phase one, and the presentation of findings to stakeholder government departments and donors.

Constraints were faced during the study in the form of limited current poverty and labour market information, and the fact that the primary household survey available was carried out in 1998, prior to the major drought and food security shocks of recent years, which are likely to have brought about significant changes in the structure of the household economy. The sensitive nature of the research, and the fact that this Study coincided with holding of the Presidential and Parliamentary elections also limited research opportunities.

First the Study sets out the role of PWPs in the context of the National Safety Nets strategy, and gives an overview of current PWP activity in the country. The tension between the policy objectives ascribed to PWPs and their impact is outlined, and the inadequacy of the current wage highlighted in terms of meeting the subsistence needs and promoting the livelihoods of participants.

An economic analysis of the PWP wage rate is then presented. Wage levels are found to be highly variable across the sector, with the lowest being the MASAF wage, which was set in 2001 and has lost 30% of its value since this time2. If it were to maintain keep pace with the minimum wage inflated to 2004 values, it would need to be raised to MK54.

The monetary value of monthly basic household subsistence needs is derived from three different subsistence lines, one estimated on the basis of the IHS, one using a basic basket of goods, and one derived from workers own evaluation of their minimum needs.

Once other income and own production is taken into account, estimates are made of the daily wage required to meet annual basic subsistence needs, taking into account 3.5 months own food production, on the basis of the three subsistence lines. These figures are then considered in relation to prevailing wages, and a PWP daily wage of no less than MK83 a day recommended to ensure that the basic subsistence needs of participating households are met. This is necessary if programmes are to have the potential to achieve the objective of sustained poverty reduction and livelihoods promotion. This wage rate would reduce the hours of work required for participating households to acquire the income needed for basic household subsistence. This in turn would increase the time available for own production or alternative IGA, and offer the opportunity to engage in higher return economic activity.

Given the nature of the Malawi labour situation, with significant over demand for low paid agricultural employment, this wage would be unlikely to have negative or distortionary labour market impacts.

This recommended wage represents an interim wage level due to the provisional nature of the subsistence lines on which it is based. A survey-based costing of the basket of goods required to satisfy basic subsistence needs in Malawi is required to confirm these figures. In addition the wage should be reviewed each year in line with rural inflation. Regional wage rates may be adopted to reflect the considerable regional variation in the cost of basic consumption goods; it is not likely that this will have a distortionary impact on the labour market.

However, the livelihoods benefits anticipated for the recommended wage rate will only be realised if key design and implementation issues are also addressed.

The wage rate does not function as an adequate mechanism for targeting the poorest in Malawi, and community targeting is required if the poorest are to participate. While their work requirement renders public works unsuitable safety nets for households without available labour3, labour constrained households (ie households with only one economically active adult) are among the poorest, particularly where the active adult is a female, and have the potential to benefit significantly from shifting their labour to higher return public works activity. For this reason it is recommended that this group should be explicitly targeted.

It is also recommended that the length of PWPs should be extended to 18 months to ensure support over two planting/hungry seasons, and that programmes should also include components which facilitate saving and the development of income generating activities. Workers should be paid on time, and programmes scheduled to coincide with seasonal needs of workers. Incentives and contract conditions should be used to ensure that private contractors comply with programme recommendations, particularly regarding poverty targeting. The location of PWPs should be selected according to poverty targeting and include a range of infrastructure projects prioritised in the DDP and including maintenance as well as asset creation.

Finally it is recommended that the Safety Nets Unit should take forward the above recommendations for revising and harmonising programme design, in order to reduce the gap between PWP policy objectives and their impact.


Footnotes:

  1. See for example the report on proceedings of the MASAF/World Bank Completion Workshop for MASAF II (2003), at which concerns regarding the level of the wage rate were voiced by MASAF and District staff.
  2. The very recent increase in the MASAF wage rate from MK30 to MK37 has compensated only in part for this loss in real value.
  3. For example households where there are no physically able adult members.




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