By Dr. Faith Ababio-Twi

Ghana's workforce consists of civil servants, public sector employees, and private sector workers. Recently, the government approved a 10% salary increase specifically for Single Spine Salary Structure (SSSS) workers, who are mainly public sector employees. However, this increment does not necessarily translate into substantial financial relief due to tax deductions and rising living costs. After taxes, the actual increase in take-home pay is estimated at approximately 6%, reducing the real impact of the increment.

Inflation and Its Impact on the Economy

Inflation plays a significant role in shaping economic conditions, sometimes intentionally influenced by governments. Reports indicate that the Bank of Ghana has exceeded its money-printing limits, contributing to inflationary pressures. The injection of excess liquidity, particularly during election periods, results in price instability and weakens the purchasing power of citizens.

At the time of elections, unaccounted-for funds are often pumped into the economy, a phenomenon sometimes referred to as "free money." The lack of proper accountability over the exact amount of money in circulation leads to increased inflation, affecting both businesses and households.

If only Single Spine Salary workers receive a salary increment while broader economic factors remain unchanged, the overall effect on inflation is minimal. However, without addressing the root causes of inflation, economic hardship will persist.

The Tax Burden on Public Sector Workers

Public sector workers, who fall under the Single Spine Salary Structure, cannot avoid taxation, meaning any salary increment is offset by higher deductions. While the increase may seem like a relief, the real financial benefit is significantly lower than anticipated.

Meanwhile, civil servants and other workers outside the Single Spine Salary Structure have not benefited from this increment. Similarly, private sector workers, who contribute significantly to Ghana's economy, receive no direct government salary adjustments and must cope with rising inflation on their own.

Instead of solely relying on salary increments, alternative benefits such as fuel coupons, transportation allowances, and tax incentives could offer more practical solutions. Unlike salary increases, these benefits are not taxed and could provide more substantial relief to workers.

Challenges in the Transportation Sector

Ghana’s inefficient distribution system significantly affects transport operators. For instance, a driver traveling to remote areas may experience vehicle wear and tear, such as shock absorber replacements, which add to operational costs. These expenses are eventually passed down to consumers, increasing the cost of goods and services.

The Impact of Fuel Prices on the Economy

Fuel prices remain one of the biggest economic concerns in Ghana. When fuel costs rise, the price of transportation and distribution increases, which in turn affects the cost of goods and services. Addressing challenges in the energy and petroleum sector while investing in alternative energy sources would provide a more sustainable solution to rising living costs.

If policymakers focus on stabilizing essential commodities instead of only increasing salaries, workers will experience real economic relief. A 100% salary increase would be meaningless if the cost of food, fuel, and utilities continues to rise. Therefore, a structured approach to economic management is necessary.

Policy Considerations for a Sustainable Economy

Historically, no president has implemented salary increments within the first 100 days of office. However, the current administration approved this increase within its first 60 days, showing responsiveness to workers’ concerns. While this is commendable, a more holistic approach is required to ensure that all sectors feel the economic impact.

For wage increments to have a meaningful effect, they must be accompanied by broader policies addressing inflation, fuel prices, and the cost of essential goods. The average Ghanaian public sector worker earns between 5,000 and 7,000 cedis, meaning the actual benefit of this increment translates to approximately 400 to 700 cedis—an amount that is quickly absorbed by rising expenses.

Additionally, if Ghana expanded its export sector, the country could generate more foreign exchange, stabilize the currency, and reduce inflationary pressures. A strong export industry is crucial for maintaining economic balance and ensuring a steady flow of revenue.

Conclusion

For real economic relief, Ghana needs a comprehensive strategy to support all workers and stabilize key sectors. Policymakers should shift from temporary solutions, such as salary increments, to long-term economic measures that promote financial stability.

By addressing fuel prices, improving public transportation, and investing in alternative energy sources, the government can create a more resilient economy. With a well-structured framework, Ghana can ensure lasting relief for its workforce and achieve overall economic stability.

About the Author

Dr. Faith Ababio-Twi is a Financial Consultant and CEO of FAB Consult - USA.