Navigating slippery path to new minimum wage
As preparations gear up towards implementing a new national minimum wage, stakeholders say steering the negotiation towards achieving a fair wage structure for Nigerian workers is ultimate, GLORIA NWAFOR writes.
AMIDST the backdrop of socioeconomic challenges, including the high cost of living, Nigerian workers are already anticipating a new minimum wage that reflects the current market realities.
Despite government efforts to address workers’ concerns, the purchasing power of Nigerian workers has significantly eroded, necessitating a revision of the minimum wage.
Globally, governments set a minimum standard of acceptable remuneration for workers.
According to the International Labour Organisation ( ILO), the Minimum wage is, “the lowest wage that an employer is allowed to pay the employee, the price floor below which workers may not be willing to sell their labour.” Whether or not this aim is achieved depends on diverse variables within a polity. These variables include the prevailing cost of living, relative economic strength, per capita income and productivity at a point in time. Historically, Nigeria has witnessed challenges in implementing minimum wage adjustments, often marred by political complexities.
From its inception in 1981 to the recent National Minimum Wage Act of 2019, each revision reflects a tug- of- war between labour unions, government entities, and other stakeholders.
For instance, the minimum wage in Nigeria was fixed at N125 per month, reviewed upwards to N7,500 in 2001, and later in 2011 to N18,000.
The hyperinflation and the pressure from the Nigeria Labour Congress ( NLC), Trade Union Congress of Nigeria ( TUC) and other stakeholders within the sector resulted in the passage of the National Minimum Wage Act 2019.
The Act made an upward review of the national minimum wage from N18,000 to N30,000 in 2019, to meet the demands of the time.
Experts are of the view that the current impasse highlights the need for a holistic approach to address longstanding disparities and ensure equitable compensation across sectors.
While the rhetoric surrounding minimum wage increases abounds, the implementation at the state level remains fraught with challenges.
Despite increased federal allocations, some states struggle to meet the current wage threshold, exacerbating industrial tensions and economic disparities.
This, the experts said, brings to the role of political will and administrative capacity as crucial factors in bridging the gap between policy intent and on- the- ground realities.
As the 37- man tripartite committee, comprising the government, employers and workers navigates the negotiation process, diverse perspectives emerge on the optimal wage structure.
Stakeholders, including labour unions, employers’ associations, and government representatives, advocate for varying wage figures, reflecting regional disparities and economic constraints.
For instance, the NLC had proposed a living wage of $ 300, stating that it was due to the fall in the value of the currency, while the Trade
Union Congress of Nigeria ( TUC) proposed a monthly minimum wage of N447,000.
NLC President, Joe Ajaero explained that labour will be guided in adopting a new minimum wage based on economic parameters which consider the current cost of living in the states as well as the exchange rate of the naira to the dollar.
He said that faithful implementation of the new minimum wage by the government at all levels and the private sector would help increase the disposable income of workers and their purchasing power.
He said the challenge lies in reconciling divergent interests to arrive at a mutually acceptable agreement that balances workers’ welfare with economic sustainability. Already, a memoranda summary of public hearings on the new minimum wage from across the zones and positions made on the group, suggests that the wage floor has been opened for negotiation for collective bargaining, where eventually a figure would emerge.
Documents showed that an average of 56 memoranda was received on the zonal public hearing, where an average new minimum wage of N622,650 was suggested across the geopolitical zones.
While North Central suggested N338,400, North East suggested N298,277, North West suggested N355,210; North East, N495,666; South- South, N1,199,400 and South West, N472,200, giving an average total of N622,650. Given the figure and their inability to pay, many states have asked that they negotiate at their level because up to date, some states could not even raise to N30,000 to pay their workers.
Analysts stressed that increasing the minimum wage without corresponding increases in productivity could lead to higher costs for businesses, potentially resulting in layoffs or reduced hiring, thereby exacerbating unemployment and further straining the economy.
A professor of accounting and financial development, Godwin Oyedokun, had opined
that no matter the amount workers receive at the end of the month, it will not be impactful on their livelihood if the cost of living continues to experience an upward swing. He said that instead of wasting valuable time putting in place a wage structure that will be sabotaged by politicians, the desirable effort should be concentrated on building an economy that works for all.
He maintained that the economic disincentives create challenges that confront the economy, in particular, the value of the money the worker is being paid as wages. He urged that the government ought to be well advised to focus its attention on measures to make the economy work.
According to him, the government must necessarily incentivise Nigerians to be productive.
That, according to him, is the way to go if Nigeria must have a workforce that is stimulated enough to play their role in building the nation, “otherwise, wage review or increase will remain what it has always been- a hollow ritual that brings more pain than comfort.” Former President of the Trade Union Congress of Nigeria ( TUC), Peter Esele, said while the conversations on negotiation are ongoing, the committee should look for an area that is mutually beneficial to both the government, employers and employees, noting that if the right amount is paid, it would stimulate the economy and bring about business growth. Esele, who recalled when he was part of the process, said it was in the interest of the government and employers that there should be an agreement.
While some states still default in paying the N30,000, he lamented that even in Borno State, some teachers earn N13,500 as salary. “How do you expect the productivity of such workers to grow and how do you expect the person to survive in that mental frame of mind and pass knowledge? I hope that governors stand and treat workers right because when you do so, you stimulate the economy. The super- rich don’t stimulate the economy, it is the middle and those struggling because they must spend money,” he said.
Professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, said the government is still haggling with labour over what the minimum wage should be, noting that even with the current N30,000 some states have refused to meet up with the N30,000 despite the increase in funds from the federation account in the last six months and the extra N5 billion extended to them by the Federal Government.
He lamented that workers are treated with disdain by political leaders and even some
private sector entrepreneurs who are more concerned about their high standard of living than workers’ existence on slavery wages.
An important part of the rationale for tagging Nigeria the poverty capital of the world is that the minimum wage is below the $ 2.15 per head, regarded as the international poverty line, which was before the current massive depreciation of the naira.
With the depreciation, the high inflation rate and the consequent worsening cost of living, he said the current minimum wage has become a footnote in the consumer spending equation.
He opined that the starting point of the minimum wage negotiation should be linked to the poverty index of $ 2.15. According to him, there should not be any excuse if the government wants to reduce the poverty level in the country, encourage productivity in public and private sector production and thus raise the standard of living to take the country out of the appellation “poverty capital of the world.” He maintained that many governors do not appreciate the payment of salaries to their workers in terms of the multiplier effects on the production of goods and productivity of workers in the state.
While noting that all states cannot pay the agreed minimum wage because the cost of living differs, he said while some should pay above, no state should pay below the minimum wage, adding that efficiency wage was the way to go.
A labour, employment and immigration law expert, Ose Okpeku, who spoke on how nations arrive at a minimum wage figure and what Nigeria’s minimum wage should be, emphasised that the method of deciding on a minimum wage must be thoroughly interrogated.
According to him, if a person works 40 hours per week, at a minimum what she earns should cover transportation to and from work and basic needs.
“So, the question I ask is how much does anybody need to survive on a basic level in Nigeria? This would include the cost of food, medicare, education in a public school, and inflation, and factor this to arrive at a minimum wage people can live on. Okpeku, who is also a Partner, at The Law Crest LLP, noted that in other climes, there is an efficient public sector with basic infrastructure, and social security fireworks that people can fall back on.
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Faithful implementation of the new minimum wage by the government at all levels and the private sector would help increase the disposable income of workers and their purchasing power. ”