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Business News of Thursday, 23 November 2017

Source: Graphic.com.gh

Builders Corps won’t burden wage bill — Finance Minister

The Finance Minister, Mr Ken Ofori-Atta, has dismissed concerns by economists and policy analysts that the government’s decision to employ some 100,000 graduates under the Nation Builders’ Corps (NBC) is a wrong move that will increase the pressure on the public sector wage bill, explaining that the initiative is a necessary answer to an imminent explosion by unemployed youth in the country.

With graduate unemployment bulging out of control (ISSER estimates that 90 percent of graduates do not find jobs after their first year of graduating), the minister said the country needed credible and sustainable measures to help provide jobs for the youth or risk an explosion soon.

One such initiatives, he said, was the NBC, which aims to employ some 100,000 graduates to, among other things, collect taxes, enforce sanitation rules and deliver health and education services in the various district, municipal and metropolitan assemblies.

He added that the programme would be structured to ensure that its positives would outweigh the negative impact it might have on the wage bill.

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Making choices

Reacting to queries on the impact of the programme on an already bulky wage bill, Mr Ofori-Atta said at the PwC Post Budget Forum on November 22 that the NBC was a well-thought-out programme meant to address the national security risk posed by growing graduate unemployment.

The forum is an annual initiative by the PwC to help break down government policies as announced in the budget to partners and stakeholders of the audit and accounting firm.

“I think that sometimes we have to make choices and the NBC is one of those choices,” he said in reference to the government’s juggle between reining in the wage bill to help sustain fiscal stability and taking steps to address the growing unemployment challenge.

“The NBC is an example of the choices that we have to make because truly, the unemployment situation has become a national security risk. Because of that, you are torn between the rigidity of fiscal consolidation and an imminent explosion and you have to make choices,” he said.

Given the risk of an explosion and its impact on national security, the minister said the government chose to address the unemployment challenge through the NBC, which is expected to be operational next year.

Fiscal rigidities

Under the initiative, each of the 219 districts are to employ, train and equip 462 graduates to teach under the ‘Teach Ghana’ initiative; clean and enforce sanitation laws under a ‘clean Ghana’ campaign and provide health care under the ‘Heal Ghana’ initiative.

The rest are to be equipped to mobilise revenue under the ‘Revenue Ghana’ initiative with others providing agricultural extension services under the ‘Feed Ghana’ initiative.

Although laudable, some economists and policy analysts have berated the initiative, as an extra pressure on the already overburdened wage bill.

Dr Eric Osei-Asibey of the Economics Department of the University of Ghana, Legon, said at the forum that the country would be better off if the NBC was handed over to the private sector to implement.

With the wage bill already accounting for 32 per cent of total revenue and grants, Dr Asibey said adding another 100,000 persons to the payroll could put public finances in “a precarious condition”.

“Because of the fiscal risk that we already have, I will want this fine idea to be private sector-driven, such that the institutions that will be engaging these graduates will pay them outside government wage bill. If that is done, then it’s brilliant; otherwise, I am afraid the wage bill will suffer,” he said in an interview after the forum.

Limiting social spending

After ending 2009 at GH¢2.9 billion (62 per cent of tax revenue), the wage bill has been on the increase, quadrupling to GH¢9 billion (73 per cent of tax revenue) in 2012.

As of September this year, about 667,000 people were employed under the public sector and their salaries and other remunerations accounted for about 48 per cent of tax revenue. The 2018 budget now estimates that the wage bill will amount to GH¢16.8 billion, equivalent to 42 per cent of that year’s tax revenue.

This means that of every one cedi that will be collected in taxes next year, about 42 pesewas will be used to pay wages, leaving less than 60 pesewas for capital expenditures and other expenses related to goods and services.

“This gives the government limited space to do social and economic spending that will actually provide sustainable growth and expand this economy to be able to employ more people in a more productive and sustainable way,” Dr Asibey said.

In an apparent response, the finance minister said: “We feel strongly that the net effect will be a lot more positive than the add-on that we are going to have by adding them to the wage bill.”