Across Ghana, workers — from corporate employees to teachers, traders, nurses, artisans, and public sector staff — are experiencing the same frustrating reality: prices rise faster than their salaries. Even when salary adjustments are made, the cost of living seems to increase twice as quickly, leaving many people feeling poorer each year.

Why does this happen? Why do salary increases feel meaningless? And why does inflation always seem one step ahead?

This editorial by The High Street Business breaks down the core economic forces behind this imbalance and explains how inflation consistently outpaces wage growth in Ghana.

Understanding Inflation and Its Real Impact on Workers

Inflation refers to the general increase in prices over time. When inflation rises, the value of money falls. This means that even if you earn more, your purchasing power might drop.

For example:
If your salary increases by 10% but inflation rises by 15%, you effectively lose 5% of your real income.

This gap between inflation and wage growth is the core reason many Ghanaians feel like they are working harder but achieving less financially.

1. Salaries Adjust Slowly, but Prices Adjust Quickly

One major reason inflation outpaces salary growth is timing.

Prices adjust instantly.

Transport fares, food prices, rent, data bundles, utility bills, and fuel can change overnight. Businesses adjust prices immediately whenever:

• Fuel costs rise

• The cedi depreciates

• Import duties increase

• Supply chain costs go up

Salaries adjust yearly (or sometimes never).

Most organizations — especially government and small businesses — review salaries only once a year. Some go years without reviewing wages.

By the time salary increments happen, inflation has already moved far ahead.

2. The Cedi’s Depreciation Makes Everyday Life More Expensive

Ghana depends heavily on imported goods, from food to electronics to fuel. When the cedi weakens against major currencies:

• Importers pay more

• Businesses increase prices

• Consumers feel the impact instantly

However, salaries do not adjust when the currency weakens. Workers continue to earn the same amount, but everything costs more.

This is one of the biggest reasons inflation beats salary increases.

3. Employers Face Rising Operational Costs

Businesses in Ghana operate in a high-cost environment:

• Rent increases

• Electricity tariff hikes

• Transportation and logistics costs

• Taxes and levies

• Raw material price increases

Employers pass these costs to consumers via higher prices — but they do not always compensate workers at the same pace.

Many businesses operate on thin margins, so they increase prices first and review salaries later (if ever).

4. Salary Increases Are Often “Nominal,” Not “Real”

When employers raise salaries by small percentages like 5% or 10%, it may seem helpful — but it’s often not.

Nominal salary increase:

A raise in the amount you are paid.

Real salary increase:

A raise that increases your purchasing power after adjusting for inflation.

If inflation is 25%, and your salary increases by 10%, you are actually 15% poorer — even though your salary went up.

Many Ghanaian workers confuse nominal raises with real raises, which is why salary adjustments feel meaningless.

5. Inflation Is Driven by Structural and Long-Term Issues

Ghana’s inflation is not only caused by short-term events. There are deep structural issues that make prices rise continuously:

• High import dependency

• Weak local production

• Currency instability

• High interest rates

• Public debt pressures

• Tax-driven price increases

• Fuel cost volatility

These structural issues keep long-term inflation high, but salaries do not increase at the same structural level.

6. Wage Negotiation Power Is Low

In many sectors, especially the informal and semi-formal job markets, workers have little bargaining power. This creates situations where:

• Employers delay salary adjustments

• Workers accept low pay due to job scarcity

• Minimum wage increases are small and slow

• Unionised workers negotiate better, leaving others behind

Low bargaining power means wages do not reflect the real cost of living.

7. Employers Aim to Control Payroll Costs

Payroll is often the biggest expense for companies. To avoid rising operational costs, many employers:

• Freeze salaries

• Delay increments

• Offer below-inflation raises

• Reduce staff development budgets

While prices rise due to external factors, employers try to protect their margins — resulting in wages lagging behind.

8. Rising Population and Job Competition

As more graduates enter the job market each year, employers have a larger pool of candidates willing to accept stagnant wages. High job competition reduces pressure on employers to raise salaries significantly.

The Psychological Side: Why You Feel Poorer Each Year

Even if salaries increase, workers still feel financially pressured because:

• Essential goods (food, rent, utilities) inflate fastest

• Non-essential lifestyle costs (entertainment, travel) rise steadily

• Savings lose value when inflation rises

• Investments underperform in high-inflation environments

Your salary might rise numerically, but your life does not improve — because the cost of essential living increases faster.

What Workers Can Do to Protect Themselves

If inflation will always be ahead of salary increases, how can workers stay financially stable?

Here are evergreen strategies:

1. Build Multiple Income Streams

Depending on a single salary is risky. Side businesses, freelance work, and investments offer extra protection.

2. Invest Regularly (Even Small Amounts)

Treasury bills, mutual funds, money market funds, and index funds can protect against inflation when interest rates rise.

3. Track and Adjust Your Budget

Review your spending frequently. Identify which expenses are growing fastest and adjust accordingly.

4. Develop High-Income Skills

Digital and technical skills allow workers to earn more than inflation-driven wage markets.

5. Negotiate Salaries More Strategically

Use performance records, market salary data, and productivity metrics to strengthen negotiation.

6. Save in Inflation-Protected Assets

Stores of value like:

• T-bills

• Hard currency savings (in moderation)

• High-yield savings accounts

…can help preserve purchasing power.

Long-Term Solutions Required at National Level

To permanently solve the issue of inflation outpacing salaries, Ghana needs:

• Stronger local production

• More stable currency policies

• Affordable credit for businesses

• Reduced import dependency

• Improved wage negotiation structures

• Better labour policies

Until structural reforms occur, inflation will continue to run ahead of wage growth.

FAQs

1. Why do salaries in Ghana not keep up with inflation?

Because inflation is driven by fast-changing market conditions while salaries adjust slowly, sometimes yearly or not at all.

2. Does a salary increase always improve purchasing power?

No. Your salary must increase above inflation levels to improve your real income.

3. How does the cedi’s depreciation affect inflation?

A weak cedi makes imports more expensive, causing widespread price increases that salaries cannot match.

4. What sectors suffer the most from inflation?

Retail, manufacturing, transport, hospitality, and households with fixed incomes feel the hardest impact.

5. How can workers protect themselves financially?

By building multiple income streams, investing consistently, budgeting wisely, and improving skills

Source: The High Street Business