–Instead of Cutting Salaries
By Jerromie S. Walters
MONROVIA, Liberia — Ephraim T. Nyumah, a Teaching Assistant in the Department of Economics at the University of Liberia and a student at the Louis Arthur Grimes School of Law, has argued that Liberia should raise take-home pay by increasing the minimum wage and reforming personal income tax bands rather than simply cutting the salaries of public officials.
In his latest commentary, Nyumah acknowledged that public anger over the pay disparity between well-compensated officials and low-earning public servants is understandable, noting that he too has frowned upon such inequities and that his view has not changed. However, he insisted that a pay cut is not the solution, and that increasing the minimum wage, adjusting the income tax rate, and tackling other conditions that worsen the overall cost of living are the way forward.
Nyumah rejected the reasoning behind calls for salary reductions based on comparisons with countries such as Sierra Leone, Ghana, and Nigeria, explaining that any honest comparison of salaries and benefits must also measure the cost of living in each country and the basket of goods a unit of the country’s currency can buy. He illustrated this by asking how much internet data US$20 can buy in Liberia versus Sierra Leone or Nigeria, and how much a standard plate of food costs at a restaurant in each country, stressing that placing a Liberian salary beside a salary in Sierra Leone, Nigeria, or Ghana compares numbers, not living standards.
Recalling that his economics teacher called this the purchasing power of money, he noted that in Monrovia people make more money but the money buys less, because Liberia is a dollarized, import-dependent economy in which rice, fuel, building materials, and most consumer goods arrive at import prices plus transport and margins.
Nyumah cited a comparative dataset and noted that grocery prices in Monrovia are about 86 percent above those in Freetown and that utility costs are more than twice as high, while rent for a decent, secure home with water and power is costly in Liberia. He added that a modest three-bedroom house costs about US50,000 to build in Liberia compared to less in other ECOWAS countries, meaning a family of four earning US$800 a month in Freetown is likely to live better than a family on the same income in Monrovia. He therefore concluded that any honest pay debate in Liberia must start from purchasing power rather than announced salaries.
Moreover, he argued that Liberia’s personal income tax system compounds the problem by punishing even the lowest salary earners, which justifies his position that salaries should not be reduced but that the minimum wage must be increased. He explained that the tax bands are fixed in Liberian dollars and that the tax-free threshold is only LRD 70,000 a year, roughly US$ 169 per dollar, meaning almost every worker in formal employment, including a security guard, a cleaner, or a filing clerk, pays income tax.
The Economist noted that the 5 percent rate applies above US99 a month, after which the 15 percent rate takes over, so that a worker on the minimum wage of US141 a month, already pays 15 percent on every additional dollar earned. He illustrated that a guard such as Oldman Saah serving EXSECON pays about US5.66 in NASSCORP, taking home about US300 a month pays about US12 in NASSCORP, taking home about US$255 and losing roughly 15 percent of gross pay.
Turning to the top of the tax bands, Nyumah described this as the most interesting part, explaining that the top rate of 25 percent starts at LRD 800,001 a year, roughly US400 monthly or a Registered Nurse at JFK earning a similar amount pays the same top marginal rate as a Deputy Minister at the Finance Ministry earning about US1,500 a month pays US60 to NASSCORP, taking home about US$1,116 and losing roughly 26 percent of gross pay. He warned that because the tax bands are not indexed to the exchange rate or inflation, every depreciation of the Liberian dollar pulls the poorest workers into higher bands, amounting to a hidden tax increase on the working poor who spend every dollar they earn in the local economy.
He noted that he wished he had enough time to discuss the goods and services tax as well, explaining how used car dealers and others who bring goods through the ports pass the burden of tax on to poor consumers whose salaries are already eaten by a huge personal income tax, and concluded that no matter how many billions the Liberia Revenue Authority collects, the gap between the poor and the rich will keep expanding due to the personal income tax exploitation mechanism that the Government of Liberia is refusing to adjust.
Beyond economics, Nyumah addressed the argument that huge salaries undermine anticorruption efforts and the integrity of governance, clarifying that he was not arguing that an increase in basic salary is directly proportional to good governance. He nonetheless maintained that better pay is part of a country’s integrity system, because when an official’s legitimate income cannot cover a decent life, the expected cost of taking a bribe falls and the temptation of stealing rises, while when a well-paid job is at risk on discovery, honesty becomes the rational choice.
He stressed that high pay alone does not stop corruption but works alongside credible detection and punishment, and that leaders or key workers of entities controlling large sums of government resources, such as the Liberia Revenue Authority, the Central Bank of Liberia, the Public Procurement and Concessions Commission, anti-corruption and audit bodies like the LACC, GAC, and IAA, and the judiciary, cannot be filled with competent and honest people at subsistence pay and deserve better salaries and benefits consistent with their roles and the cost of living in Liberia.
He warned that cutting salaries indiscriminately would in fact reward the corrupt, who do not depend on their salary, and drive out the honest professionals who do, leaving the system worse than it is now.
For these reasons, Nyumah called on the government to review the minimum wage, which has remained at US$0.68 an hour for unskilled workers since the Decent Work Act of 2015, and thereafter to adjust it regularly against a measured cost-of-living basket.
He also urged the government to muster the courage to index the income tax bands to the exchange rate and inflation by raising the tax-free threshold and adding intermediate bands so that the 25 percent rate falls on genuinely high-income earners rather than the starving poor. Acknowledging the argument that such adjustments would cost revenue, which he said is the big argument for the LRA and Ministry of Finance, he asked what the benefit is of collecting huge personal income tax unfairly if that policy keeps making the poor poorer, and suggested that any revenue lost can be recovered by widening the tax base and taxing rents and unrecorded income.
He further recommended that rather than simply cutting salaries, the government should review the benefits attached to public office, including vehicles, fuel, allowances, and sitting fees that are hidden from public view, and publish a single, transparent pay and benefits schedule for every office. He added that integrity-sensitive positions should carry competitive pay tied to asset declarations, performance contracts, and dismissal and prosecution for abuse of public funds, and that an official cost-of-living and purchasing-power analysis or study should be commissioned so that future pay debates rest on evidence rather than political headlines.
In short, Nyumah concluded that Liberia does not have a problem of paying people too much but rather a problem of paying unevenly, taxing heavily, and enforcing weakly, and that the answer is to raise the floor, lower the tax burden on working people, cut hidden gratuities, and pay well where integrity matters most, while holding every official accountable.
