The impact of the proposed increment
in minimum wage on businesses in
Zambia
Lubinda Haabazoka, PhD
Copperbelt University, School of Business,
Kitwe
Introduction

Zambia’s labour industry performed well after independence mostly due to the centralized
economy with the majority of workers receiving good salaries especially those working in the
mining industry.

After 1991 with the introduction of a market economy, over 220 companies were privatized but
most of them were shut down because their products could not compete with foreign goods
produced mostly in South Africa.

The closing down of a lot of factories created a lot of unemployment in Zambia, a trend that still
continues.

Because of enhanced competition for the few jobs in the country, employers started exploiting
desperate job seekers by offering them merger salaries and also employing them on short term
contract s.

It is against this backdrop that the Zambian government reviewed the minimum wage Act in
1997 and also begun regularly adjusting the minimum wage so as to enhance job decency.

The main aim of this paper is to learn how the minimum wage adjustments impact Zambian
businesses.,
Paper organisation
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Section one - Introduction
Section two - Overview of Zambia’s
Labour Market
Section three – Minimum Wage and its impact
on businesses
Section four – Other effects of minimum wage
increase
Section five - Recommendations
Section six - Conclusions
Overview of Zambia’s Labour Market
Overview of Zambia’s Labour Market
Formal and Informal Employment, 2008 and 2012
Overview of Zambia’s Labour Market
Overview of Zambia’s Labour Market
(Salaries of non Executives in Zambia)
Minimum Wage changes in Zambia for the
past 17 years
Levels of minimum wage in selected
countries
Impact of Minimum Wage on the labour market
Impact of Minimum Wage on price levels
and supply of goods
Other direct and indirect effects of
increased minimum wages that may occur

Increasing the likelihood and duration of unemployment for low-wage
workers, particularly during economic downturns;
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Encouraging employers to cut worker training;
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Discouraging part-time work and reducing school attendance;
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Encouraging employers to cut back on fringe benefits;
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Encouraging employers to install labour-saving devices;
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Increasing inflationary pressure;

Increasing teenage crime rates as a result of higher unemployment; and

Encouraging employers to hire illegal immigrants.
Recommendations
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In order to set an optimal level of minimum wage in Zambia,
government should consult stakeholders so as to factor in the cost
of doing business;
Government should ensure that all increases in minimum wages are
matched with an increase in labour productivity because that is the
only way companies and even government can sustain the wage bill.
There is need to set up different minimum wages for different
industries because each industry has its own cost structure and
labour intensiveness.
Apart from chocking registered firms, government should ensure
that the inform sector which is the largest employer also complies
with the prevailing minimum wages. Informal businesses should be
encouraged to formalize so as to increase government revenue.
Thank you for your attention!!!