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Resolving Nigeria’s Minimum Wage Crisis

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Resolving Nigeria’s Minimum Wage Crisis

Nigeria has been thrown into an industrial dispute-situation in the last few weeks on account of a lingering dispute between the government and organised labour on a new minimum wage package for workers.

While the extant laws of the land clearly stipulate five-year periodic reviews of the minimum wage in line with changing economic data, the reality on ground has been that the authorities, in the manner of the Dickensian Mr. Scrooge, almost hardly want to accommodate enhanced wages for workers at any point in time. This resistance has led to occasional bouts of conflict each time the subject recurs and the current, yet-to-be-resolved dispute, is the latest in the chain.

While this newspaper appreciates the presently very parlous state of the Nigerian economy and the need to continue to keep a rein on aggregate government expenditure in the light of an equally uninspiring income scenario and additional factors of low productivity and hyper-inflation, the other way to look at the issue is whether the currently very unsavoury N30,000 minimum wage does anyone any good?

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While there seems to be an agreement by both parties on the need for a new and higher minimum wage, the challenge is what the minimum should be, which is responsible for the present deadlock. Whereas labour began with a benchmark of N625,000 based on what it termed as living wage, which it had reduced to about M250,000, government offered just N60,000 – actually an unprecedented 100 percent hike – with the governors and Organized Private Sector, OPS, insisting on N62,000, as the maximum limit of their capacity to pay.

But there are other quite fundamental issues. The first of these has to do with negotiating tone. A holistic view of the situation would underscore the fact that labour, being a primary factor in the economic production and productivity chain, is a core cost imperative in the organisational expenditure roll. So, it is important to accord it the right priority.

The second issue is that recurrent expenditure (excluding debt service) of government is already unwieldy and very heavy, accounting for 78 percent of total government expenditures in recent years. This is unhealthy and unacceptable for a country in dire need of development given that public sector workers constitute only one percent of the Nigerian population.

Thirdly, there is an appallingly low level of productivity amongst public sector workers due a bloated workforce and limited deployment of technology, both of which are mutually exclusive. This means that to achieve the later, which is technology to enhance productivity, government must right size to pay more to ensure a living wage.
Finally, is the need to watch factors like aggregate government expenditure and inflationary pressures. History of wage increase, such as the Udoji Salary Award, shows that it has immediate inflationary consequences. At a 33 percent inflation rate, caused by the uncontrolled government borrowings, removal of fuel subsidy and the devaluation of the naira, the economy is already over-heated for decent living and productive activity. At present, the country has become more import dependent that ever with most foreign manufacturing firms exiting the economy, which dollar cost implications.

Talking of other factors impeding our national economic performance, one of the first culprits is the current tilt of government expenditure: Balancing Debt servicing, the grandiose appetites of political and public sector chieftains and capital votes are high on the bill.

So, a minimum wage discussion must also aggregate these factors to achieve a lasting solution that would not rob Peter to pay Paul; in this case, favouring just workers at the expense of the generality of Nigerians.
There are also other challenges with resource allocation, such as a bloated workforce that has been heavily impacted by politically-induced appointments and the continuing practice of keeping ghost workers. Then there are issues of duplication of roles and functions, the misalignment of agencies and some of the other related and extended distortions, which audit exercises, like the Oronsanye Panel Report have already touched upon.

And finally the subject of productivity.
From the power sector to roads to seaports, to revenue mobilisation, to security services, etc, we have seen a whole lot of failings that could have been avoided if we had a less burdensome socio-political and economic structure.

We believe that, while labour can ask for any amount, the capacity to pay is critical. So, we agree with the suggestions that N70,000 should suffice, since Edo state is already paying it. The focus should be on how to reduce the cost of living, and not paying a living wage which is elastic.

But all these have translated into a much graver challenge: A disoriented and apathetic citizenry. We think that what is required now is for the current administration to stridently focus all national attention on the need for the country to see in the present situation a golden opportunity to reset itself, massively decentralise its socio-political structures and become a more efficient productive society going forward. In plain terms, Mr. President, here is your restructuring moment.

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