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Centre for review of minimum wage

Laments rising cost of living

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The elevated cost of living coupled with dwindling buying power in the country continue pushing Malawians into a tight corner, making most fail to make ends meet.

The situation has prompted the Centre for Social Concern (CfSC) to start advocating further adjustment of the minimum wage and tax bracket to K100,000 and K200,000 respectively.

This comes as a basic needs basket report published recently by the centre shows that the cost of living for a family of six in an urban setting rose to K221,543 in October, the highest in recent history.

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This represents an 11 percent increase year-on-year when compared to the K198,917 recorded in October 2020 and 6.8 percent rise month-on-month when compared to K207,334 in September.

In the 2021-22 national budget, the Treasury introduced two new Pay As You Earn (Paye) brackets of 25 percent for incomes between K100, 000 to K1.0 million per month and of 40 percent for incomes of more than K6.0 million per month.

Accordingly, the monthly Paye schedule will be K0 to K100,000 at 0 percent; between K100,000 to K1.0 million at 25 percent; between K1.0 million to K3.0 million at 30 percent; between K3.0 million to K6.0 million at 35 percent; and from K6.0 million and above at 40 percent.

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But CfSC has said, due to the ever rising cost commodities, the move has failed to attain its objective of promoting distribution of wealth in the country and increasing disposable income for all low income earners.

CfSC Project Officer for Economic Governance Benard Mphepo said in an interview yesterday that the time they were asking the government to broaden the tax band from K45,000 to K100,000, the cost of living was low.

“At that time, an average family required about K120,000 to K130,000 to survive in a month. But this has gone up to over K200,000 a month. We are not just saying this; we are basing our arguments on research,” he said.

Mphepo said, unlike in other years, when the cost of living falls between April and September, it has been the opposite this year and October has been the worst.

The Reserve Bank of Malawi announced last week that it would introduce a K5,000 note in February 2022, which, according to Mphepo, reflects the volatility of the economy.

But Employers Association of Malawi Chief Executive Officer George Khaki expressed reservations on the proposal, saying businesses are just picking up from the pangs of the Covid pandemic and raising the minimum wage would be hard.

“Apart from the Covid pandemic, in Malawi we have the issue of inflation emanating from the depreciation of the Kwacha and the rise of fuel prices on the international market. So we have to balance the two. Usually, when we are raising minimum wage, it is a matter of social dialogue,” he said

But Treasury spokesperson Williams Banda said the proposals could be submitted formally when the Ministry of Finance commences consultations for the next budget.

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