What do we know about wages in Tanzania?

Let's think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.

How much a worker earns for her or his labor is important for different reasons. First, it matters with regard to poverty since labor income counts usually for an important share of households' revenue. Secondly, it influences firms' competitiveness, especially for labor intensive activities such as manufacturing and agriculture. Thirdly, it is relevant for equity as anybody should expect a fair remuneration for his efforts. It is therefore not surprising that wages have attracted a lot of attention from economists and policy makers across the world over the years.

In Tanzania, only one third of workers report earning a wage for their labor. However, this number is growing relatively fast, especially in urban areas. A look at the statistics collected from the Tanzanian private sector highlights three interesting results:

• The average wage in the private sector was about Tsh78,000 per month (or USD 45) in 2011, which was barely above the subsistence level
• Between 2000 and 2011, labor earnings have multiplied by approximately 60 percent, after adjusting for inflation
• Real wages declined by almost 10 per cent from 2008 to 2011, possibly reflecting a slowdown in demand for labor by private firms.

The situation of wage workers in the private sector can be compared that of civil servants. This comparison reveals that public employees not only earned on average 3.4 times more than private employees in 2011 but they have also not witnessed a decline in their real wages during the recent years. On the contrary, real public wages have risen by 32 per cent between 2008 and 2011.

If the wage premium in favor of public employees reflects their higher level of education, it is more difficult to explain why the gap between private and public wages doubled from 1.7 in 2000 to 3.3 in 2011.

These statistical observations point to the following questions:

• Is the average private wage sufficient to lift Tanzanian households out of poverty?
• Do low private wages reflect the low productivity or an excess of supply of workers (fueled by the rapid population growth rate)?
• Should wages be automatically adjusted in line with the inflation rate?
• Are public employees paid too much compared to private workers even if they are more educated (two thirds of them report having secondary education against 12 per cent for the rest of the population)?
• To what extent do the recent increases in real public wages reflect higher bargaining ability or productivity gains?

Note: The statistics above are based on the 2008/09 and 2010/11 National Panel Survey, the 2000 Household Budget Survey, the 2006 Integrated Labor Force Survey, and the IMF’s World Economic Outlook Database (October 2012 version). Data from these sources are publicly available and results can be readily replicated.