Despite the commendable growth rates Rwanda has recorded in the past two decades, the current levels of income inequality remain a key challenge.
Recent research shows that despite ongoing efforts to bridge the existing income inequality, progress is not sufficient as the drive towards the service driven economy has yet to deliver high quality jobs to increase incomes for the majority.
Moreover, whereas most Rwandans remain employed in the agricultural sector, it remains largely subsistence with many living hand to mouth.
Now, the key challenge for policymakers is not only creating decent jobs but also ensuring that the growth process is inclusive. Rwanda’s growth trajectory over the past decade has been impressive with an average of over six per cent.
However, for more Rwandans to benefit from the growth process it will require deliberate concrete steps such as introducing a new much-needed minimum wage.
While policymakers are cautious about revising the minimum wage partly because they do not want to scare away investors, the lack of a slightly higher minimum wage means many ordinary Rwandans remain in vulnerable employment that does not improve their well-being and their families.
At Rwf100 per day, the country’s current minimum wage, which was set in the 1980s, is outdated and out of touch with today’s economic realities.
The Minimum Wage Fixing Convention of 1970 agreed on by member states of the International Labour Organisation (ILO) highlights crucial elements to be considered while determining the level of minimum wages.
The elements include the needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits, and the relative living standards of other social groups.
The convention also states that economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment should be considered.
But research also shows that higher wages for the lowest-paid workers has the potential to lift millions out of poverty.
Additionally, increasing the minimum wage does not hurt employment nor does it retard economic growth. The other area that can unlock income inequality in Rwanda is investing in women.
Rwanda has a big number of women who still suffer the worst cases of unpaid care work, financial exclusion, which goes on to further alienate them from mainstream development, thereby keeping many in poverty.
Research shows that empowered women tend to support their families, which improves the well-being of their communities. While there is still some disagreements of the best way to reduce inequality, there is consensus that inequality should reduce.
There has to be deliberate effort focusing particularly on policies intended to improve incomes for those at the bottom of the income distribution if we are to achieve our vision of an inclusive society.