Published On: Sun, May 27th, 2018

Minimum wage: A cautionary note

By the third quarter of this year, the nation will implement a new minimum wage for the working population according to the minister of labour, Dr. Chris Ngige. This commitment was the result of a tripartite negotiating committee set up by the government with labour to agree on the benchmark. Initially, the workers demanded for N56,000 per month but this has been increased to N65,000.

“The committee has received memoranda from all the critical stakeholders and should begin the implementation of a new minimum wage in the third quarter of this year.” The current minimum wage is N18,000 and was brought to effect in 2011 and lawmakers have argued that no Nigerian worker can survive on that.

Director General, Budget Office of the Federation, Ben Akabueze, earlier in the month, said without a provision in the 2018 budget, the Federal Government would prepare a supplementary budget.

As a responsible stakeholder, we wanted to sound a note of caution before we shoot ourselves in the foot. Although the argument can be convincingly made that the N18000 minimum wage is grossly inadequate as a decent living wage, yet just awarding whatever is considered appropriate income is hardly the solution. Indeed, providing a living wage is not about the quantum of money paid but the value the money offers or is derivable.

We have been this route before and if history is anything to go by, this country is again being set up for major economic and social dislocation. Our leaders have this penchant to avoid serious hard work and usually take the shortcut to policies.

Increasing workers wage by over 400 percent can hardly be justified for any reason rather than a reluctance to deal the attenuating conditions because such magnitude of increase will definitely have very debilitating effects on the economic, social and political life of the country.

When the Udorji salary award was given in 1973, the country was flooded with petrodollar wealth, the working population was smaller, and the economy was less traumatized and depressed than today. Yet it has been generally identified as the beginning of the revenue and expenditure mismatch that has plagued the country ever since.

Today the federal government spends 81 percent of its budget on recurrent expenditure leaving hardly anything for capital votes which is what impacts on the people’s lives and the economy. As will be expected, a further increase in the wage bill will aggravate the situation.

The working population in the country is less than 10 million and already over 60 percent of the resources are spent on them. To add to this disproportionate distribution of national resources is clearly unjust and inequitable to the people.

Also government, especially federal government is not the only employer in the country. There are states and private sector people, who will bear the burden of this action. At present most state governments are struggling with the current minimum wage and a majority of private sector employers simply cannot pay. In fact, many graduates in the private receive just a little above the minimum wage.

So can these categories of employers cope with the new minimum wage of N65000, when they cannot pay the N18000? Such quantum of wage leap is not tied to or related with a corresponding improvement in the economy which by official admission is still fragile and unstable. This will be a recipe for industrial unrest in the country especially among the states because once the federal government pays the states’ workers would demand payment.

In economic terms, wages are not increased without reference to revenue generation, and efficiency and productivity of workers. This has been the challenge with previous wage reviews in the country. There seems to be an inverse relationship between rising wages and productivity; the workers of Udoji time were more productive and less corrupt than those of today.

Our past records with this matter suggest that though an insignificant number of the population will benefit, everybody in the country one way or the other suffers its repercussions in higher rent, higher prices of goods and services, such as transportation etc. And given the unstable nature of our economy which is just exiting recession, this will be a death blow.

We are further concerned about this policy because of the approaching elections. It is very tempting not to suggest some political undertones, which will be very tragic. Politicians are only interested in winning the next election but what happens thereafter should bother all of us.

For an economy that is facing unemployment time-bomb at about 26 percent, inflation still at double-digit, huge infrastructure deficit and decay social and human capital facility, a 400 percent wage increase is the worst step to take. Already Nigerian products are uncompetitive because of the high cost of production induced by high energy and power cost, adding labour cost would totally disadvantage Nigerian products.

Government and labour should tread carefully on this matter before we cut our nose to spite our face. The implication of any wage increase is far-reaching and should be well considered before implementation.

We recommend alternative policy to enhance workers living standards through the provision of affordable housing, transportation, educational and health services. These are the basic needs of the people and workers; they should be the focus of government policy.

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