When I thought to write to argue against the idea of a national minimum wage, I was conflicted because we are presently in a cost-of-living crisis, and the income of many Nigerians cannot meet the ever-rising prices of commodities in the market. The cost of food and other basic commodities is now out of reach of most Nigerians, as prices have continued to skyrocket, and there seems to be no end in sight.
The present administration has enmeshed Nigeria into the worst living crisis in its recorded history. How did we get here? It is no secret that we are in this precarious economic position because of the deliberate and negligent actions of the present administration in mismanaging the nation’s economy – particularly the implementation of the removal of fuel subsidy; and the devaluation of the Naira which has plunged more Nigerians into multi-dimensional poverty. The government increased the pump price of fuel from N220 to N700 per litre in big cities and N900 in remote areas; devalued the Naira from N750 and to N1500 to the United States Dollars; electricity tariffs were increased from N65 per KwH to 225KwH. All of these policies, as well as, the lingering insecurity have contributed to the worst cost-of-living crisis in the Nation’s history.
Despite the grim economic situation, the Government has continued to live large by increasing their allowances and allocating billions of Naira for frivolities including purchasing luxury cars for members of the executive and legislative houses, all profiting from the suffering of the masses. The Governors and local governments are not exempted, as they receive large allocations from the FAAC but not a single benefit to the people at the grassroots. Nigerians have been asked to be patient and tighten their belts through these ‘reforms’, but government officials continue to feed fat and buy new luxury cars while being paid ridiculously high salaries & allowances. It is clear that the working of the Government has become parasitic on the lives of the citizens.
In response to the government’s actions, the Labour unions have pressed for an increase in the minimum wage to match the rising cost of living. The Labour unions have rightly demanded a living wage but at what cost? The Labour unions have proposed an increase in the minimum wage from the sum of N30,000 to over N494,000 per month. Noteworthy, the average Nigerian worker is criminally underpaid amid massive unemployment, while the average Nigerian political office holder is one of the highest paid in the world, which is a stark contrast to the fortunes of the country. Also, the issue of a national wage increment is a sweet spot for the Labour union with the populace, as it enjoys nearly total national support, as every worker inherently feels the need to take home more money irrespective of performance or merit. The underlying principle of the minimum wage is that every worker deserves a reasonable living wage to sustain himself and his family. This principle has been established in international law.
Despite the popular support for increasing the minimum wage, this is not the way forward or the solution. We are in a cost-of-living crisis and the minimum wage is not the answer. Also, it is time to rethink the concept of a National minimum wage for workers, and whether the same remains relevant today.
Firstly, it is important to understand the present structure of the National Minimum Wage in Nigeria has its foundations in the Law. The National Minimum Wage Act 2019, prescribes that all employers in Nigeria must pay an amount not less than ₦30,000 per month to every employee in its employment. While the Act exempts certain classes of employers from paying the minimum wage i.e. (employers with less than 25 employees, employers with part-time employees; workers on commission; or in agriculture etc.), the bulk of employers are mandated to pay the Minimum Wage. The Act empowers the Federal Ministry of Labour and Employment, and the National Salaries, Incomes and Wages Commission, to monitor and implement the provisions of the Act. A Worker paid less than the National Minimum Wage is also empowered to seek redress under the Act at the National Industrial Court.
While the Act expressly exempts agriculture, employers in every other sector, irrespective of State, are mandated to pay the minimum wage, whether such sector is lucrative or the cost of living in such state warrants such payment. The cost of living in Lagos is different from Bayelsa or Sokoto. The implication of the National Minimum Wage Act is that the National Assembly has centralized the wages and earnings of workers in Nigeria at the expense of location, production or productiveness, while conveniently ignoring the peculiarities of the Nigerian economy.
The promoters of a National Minimum Wage, especially the Labour unions, argue that a minimum wage is necessary to ensure a ‘living wage’ for all workers, especially the low-skill workers, who are prone to exploitation by employers. However, the practical reality is that the minimum wage in an unproductive country like Nigeria has effectively codified worker poverty, trapping the low-skill workers in a cycle of poverty. So, what are the problems with the Nigerian National Minimum Wage as presently structured?
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- High inflationary environment/Unstable economy: A minimum wage system is unsuitable where the national economy is unstable, and there is an uncontrolled rise in the cost of goods and services thereby wiping the entire earning/purchasing power of the worker in a short period of time.
- Fulltime salaried jobs: The widely practised full-time salaried employment structure in Nigeria is unsuitable for the implementation of an acceptable minimum wage for workers. This is because full-time roles breed redundancies in the labour force. Lower-skill workers who may otherwise exploit their skills to earn more from a combination of different job roles are disincentivized from taking on more work and responsibilities to earn more money due to the restriction of full-time roles.
- Rampant unemployment and low skill level: Where unemployment is rampant, and the skill level of the workforce is low, the minimum wage becomes exploitative, as there is no incentive to increase the pay of low-skill workers, due to the unlimited supply of low-skill workers in the market.
While the government has no moral right to reject the request to increase the minimum wage of workers, the consequence of an increase outweighs its benefits. Some possible blowbacks include – Hyperinflation, job losses & unemployment etc.
On Inflation; the ‘currency value’ of money is inextricably tied to corresponding production in the State. This is how money gains value. Where ‘new money’ is created and introduced into an economy without corresponding or matching production for the ‘new money’ created, we inevitably have inflation. In other words, where the government increases the wages of workers without increasing the tangible production capacity of the workers to match the wage increase, we will have inflation, as the new money introduced is bound to increase the money supply in the economy. This is bad for the worker.
With inflation, the prices of all goods, commodities and services increase as the currency loses value. This leads to a decline in the purchasing power of the worker. In essence, any unmeasured increase in money supply circulation in the economy through unchecked salary increments will create higher commodity prices and reduce the value of whatever wage increment to mere numbers on paper. Inflation causes job losses and unemployment. This is also bad for the worker.
The increase in minimum wage alone cannot be sustained, as the revenue stream of the government is too slim to support both the massive corruption by the politicians and the increase in wages. Hence the government at all levels would likely result in printing more money to placate the need for the unions, which would be bad for the country and lead us in the path of Zimbabwe, Zambia, Venezuela and others who have suffered from hyperinflation.
So, what is the alternative for the worker? The simple answer is the Government should raise the Standard of living. The standard of living is the totality/cumulative of the value of infrastructure, goods, social services & amenities available to a citizen, as well as the cost of living in a particular place or country. A high standard of living is essentially a high quality of living. It involves good education, access to quality health care, security, low cost of food, rule of law, and other essentials that guarantee every human a safe and peaceful life. Where the citizens within a country are guaranteed stable access to electricity, drinkable water, quality education, security of life and property, portable roads, and reduced cost of accessing public infrastructure, the value of living improves without the increment of basic wages or salary. Units of currency (money) are not the measurement of the standard of living. An unrequited increment of wages without a corresponding increase in the standard of living is otherwise a depreciation of the standard of life.
How do we improve the standard of living, for starters that would involve, providing electricity at an affordable rate, building fully equipped hospitals, and reducing the pump price of fuel which is the driver of the cost of living crisis in Nigeria. Also, there needs to be a reduction in the cost of governance and borrowing. Successive governments have effectively failed the future generation with their excessive borrowing to fund frivolities as well as the ostentatious lifestyles of the political office holders. The lack of fiscal planning and massive corruption leave the nation reeling billions of dollars in debt to major foreign countries and establishments.
It is time to limit the expenditure of the government on recurring expenditures like salary and invest in education and human capital. Also, the government must embrace fiscal conservatism, and balancing of national budgets so we don’t operate deficit budgets. We need to shun failing palliative schemes and social programs that do not provide measurable value and replace them with skill acquisition schemes.
Lastly, the government must transition to a productive gig-flexible employment and wage model for workers. It is high time Nigeria moves away from the full-time monthly salary employment model. The blueprint of any successful nation is the creation of more flexible wage jobs over full-time salary jobs. A gig-flexible employment model will create more jobs for more persons by having several persons work a single job role on a time basis. This would improve skill and efficiency in non-skilled and semi-skilled jobs in sectors such as manufacturing, mining, construction, agriculture etc. The creation of such jobs should be the priority of the government as they are the drivers of economic growth and expansion. It cures the problem of rampant unemployment, encourages the learning of vital economic skills, directly solves the issue of a national wage, and allows for sector-based compensation, which would benefit the worker. Ultimately, this flexible employment model creates a workforce of skilled workers which are the granite for strong nations.
In conclusion, the Nigerian worker deserves a better life and not an increment in his basic salary. He deserves a quality life. The government needs to do its job which is good governance, based on sound policy and good economic principles.
What do we do in the short-term as the worker cannot afford to feed, nor afford the cost of living?
- Reduce the cost of living by reducing the pump price of petrol and introduce transparency in the petroleum sector and the NNPC Ltd to avoid the mistakes of subsidy like previous administrations.
- Tackle insecurity in the rural areas by encouraging community policing by empowering the traditional chiefs and kings to be responsible for the security of villages and communities, with the help of the local government and law enforcement.
- Mass agriculture and farming to reduce the cost of food. There should be an aggressive effort to mass-produce food.
- Reduce Custom Duties: The government should reduce the customs duties payable on the import of foreign goods such as food, spare parts and vital equipment which is driving inflation.
- Mass construction of housing projects and offering building subsidies to reduce the cost of constructing housing, especially in the big cities are major drivers of economic activity in the country.
All of this should be done with fiscal conservancy, to continually reduce our national debt profile, and reduce the impact of foreign currency on the Nigerian economy, which drives the cost of living in the country.
Money is not the answer to the Nigerian workers’ plight but better governance.
