Did you know that Australia has the best minimum wage in the world?
At an impressive rate of $18.30 per hour as at July, 2018. This in sharp contrast to what obtains in our country, where the national wage is set at $58 = N18,000, settling as the one of the countries with the least minimum rate in Africa. Even Ghana has a monthly minimum rate of $270. It is rather unsettling because we are regarded as Africa’s biggest economy and this begs the question as to why our workers are paid poorly.
In Nigeria, the history of minimum wage cannot be separated from the history of public service negotiations and increments. The civil servants, who are the fulcrum of any thriving government, suffer the brunt of these negotiations which most times fall through. The first National Minimum Wage Act of 1981 prescribed a minimum wage of N125 per month. This was revised in 1991 to N250 per month, revised again in 2000 to N5, 500 per month, and in 2011 to N18, 900 per month.
Labor unions have long demanded that the minimum wage be increased, citing inflationary condition, high cost of living and a contracting economy. Other advocates have cited the outrageous take-home of the Nigerian legislator as the premise for their demand- The average Nigerian senator’s salary is N13.5 million, excluding N700,000 monthly consolidated salary and allowance. Thus, the hues and cries from all quarters, marked by incessant strike actions of the Nigerian Labor Congress to press home their demands for increased wages, are not far-fetched.
It is noteworthy that on July 1, 2010; the Justice Alpha Belgore Committee recommended that the wage be reviewed at least once every five years by a statutory tripartite committee that would be appointed from time to time by the president. This bill was passed into law by both chambers of the National Assembly with minor adjustments. The demand of the Nigerian Labor Congress is therefore well-timed as a review is well overdue; and if the average Nigerian worker were to have a shot at a decent living.
It has been argued by the Nigerian Labor Congress that N18,000 was more than $100 when it became the minimum wage but today, it has been reduced to $50. Hence, subsequent to strike actions, there have been talks with the tripartite committee in order to meet their demands for a new minimum wage pegged at N30,000. According to Atiku Abubakar, our economy is already on its knees and escalation of this crisis into full-blown industrial action may have dire consequences on our nation.
In recent times, Nigeria has been given the appellation, “Poverty capital of the world”. The situation is so dire that it is projected that the present and future state of Nigeria’s economy are likely to bring the world farther from realizing the Sustainable Development Goal One I.e. End poverty by 2030. Although incoming data suggests that recovery is back on track in the second half of the year, after GDP growth dropped considerably in Q2. An ineffective tax system coupled with record spending plans for this year, have forced the government to turn to international markets for cash, adding to the country’s debt burden. This said, political uncertainty is high as the polls draw near and politics will likely put economic reforms on the backburner and delay the 2019 budget. With current statistics, industrial production (annual variation) is at -3.6%.
Without doubt, incessant strike actions which bring economic activities to a halt does not bode well for our economy; bearing in mind that we are barely out of recession. Equally, strike actions would jeopardize the health of citizens that may seek access to health facilities, and also affect the livelihood of many internally displaced persons currently sheltered in various camps. It is therefore in the nation’s best interest for the government to accede to the claims of these workers.
From the political angle, the government will not want to labor issues as the polls approach. However, the reality is the feasibility of an increased minimum wage in the light of our current economic realities. It has been argued by some experts, bearing in mind the current state of the economy; that an increase in the minimum wage is a way to boost the economy. It is right and legal to boost workers’ productivity and economy as well. Without a wage floor, employers would continue to pay less, destroying the purchasing power of workers. It is glaring that an upward review of the wages of workers inevitably remedies this effect. This invariably leads to more demand for goods and services and the subsequent increase in supply. Artisans, traders and other segments of the society will feel the impact and through this productivity, the economy is positively impacted.economy is positively impacted. However, in practice, it is more complex.
Although the new minimum rate might come with jubilations from all quarters, it may be ephemeral. There is a likelihood of demand-pull inflation; because of the increased purchasing power. Also, bearing in mind the volatile nature of the naira exchange rate; if it still remains under pressure, minimum wage will similarly depreciate. In light of the oppressive tax regime in place, little money will be left as “take-home package.”
It is noteworthy that pensioners do not benefit from an increase in minimum wage. Nevertheless, they experience the ripple effect of an inflated market. At this juncture, it is important also to take into consideration the present financial constraints of state governments. Many have recurrent expenditures comprising mainly salaries and administrative expenses which currently consume over 70% of annual budgets. Sadly, the federal government is not left out of this conundrum; leaving about 30% of the budget to service rewarding capital expenditure such as infrastructure.
Instructively, an increased national wage means that more pressure is put on the recurrent expenditure of the budgets. It is thereby means that our yearnings for improved educational and health care systems; adequate power infrastructure; safer transportation networks which should positively drive Nigeria’s economy towards inclusive prosperity will be a pipe dream. It is important to recall that these budgets are still being serviced with loans. Also, most states are dependent on federal allocations. Internally generated revenue has never been sufficient to run the affairs of most states. It ultimately means that state governments would be compelled to increase their debt burden, in order to fund salaries. Even at that, a majority of states at still owing workers’ salaries, and some had to rely on the “controversial” government bail-out funds.
We must also take cognizance of the fact that the minimum wage is on the Exclusive list and it is law; therefore, non-adherence is criminal. It thereby means that its implementation has a domino effect on private firms. Although, the Labor Inspectorate charged with ensuring adherence is not fully effective. Since the government would not want to stimulate a mass retrenchment of employees, in the private firm’s bid to maintain profit margin; it is imperative the government also makes business clime more economically friendly.
Alternatively, the Nigerian government should allow different trade unions determine their minimum wages based on consensus, as is obtainable in other climes, for better effectiveness. It is without doubt that the essence of the increment of the minimum wage is to ensure better living standards for workers. I am strong proponent of this idea. Nonetheless for this increment to have its intended effect, there is need for work to be done by the government. First off, the government needs to address inflation. One sure way is through a contractionary monetary policy.
Also, in order to address the constantly fluctuating exchange rate, government needs to improve its terms of trade favorably i.e. Increased export and less import; this can be done by investing heavily in the agricultural sector and vigorously pursuing the “Buy naira, grow naira” initiative. It should strive to ensure political stability and economic performance in order to attract foreign investors.
In addition, there should be an active effort to subsidize certain commodities and services for citizens. Most importantly, since Nigeria is a federating state; each state should be allowed to determine its minimum wage based on its budget capacity; this is a more realistic approach towards achieving the end of bettering citizens’ live. Increment in minimum wage is a Gordian Knot. Nevertheless, it can be worked around to achieve the desired end; but it requires an approach in line with the current economic realities and cooperation from all stakeholders.
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija