Calls for Increment in Minimum Wage Justifiable or Unjustifiable? Critically Examine

Calls for Increment in Minimum Wage Justifiable or Unjustifiable? Critically Examine

Introduction

The Nigerian workers agitation for increase in wages to cushion the effect of rising cost of living may have gotten a global support. As the International Labour Organisation (ILO) said the increase in minimum wages will guarantee social protection.

The ILO’s Director-General, Gilbert F. Houngbo, in a recent report by the global organisation made it clear that he sees increasing minimum wages and guaranteeing social protection benefits as priority responses necessary to protect the most vulnerable and prevent scarring caused by the multiple and interlocking global crises we face.

This may be given credence to various calls by the Organised Labour in the country who in recent times are calling for review of the new minimum wage.

Recall that President Muhammadu Buhari in April 2019, signed a new minimum wage bill into law which ushered in a new pay structure for Nigerian workers with the federal government commencing implementation almost immediately. The bill also makes it compulsory for all employers of labour in Nigeria to pay their workers the sum of N30,000 and it is expected to be reviewed after five years.

But just three years into the implementation, the Nigeria Labour Congress (NLC). The Non-Academic Staff of Education and Associated Institutions (NASU). And now the Association of Senior Civil Servants of Nigeria (ASCSN) have called for a review as the inflation have eroded the workers pay and their purchasing powers.

The increase in the national minimum wage is one of the legal mechanisms through which the purchasing power of the people/workers can be enhanced. When workers’ purchasing power is increased, it will invariably have a positive effect on the economy. To a large extent, traders, artisans and other sections of the economy will feel the impact and through that, the economy will grow.

However, the minimum wage in Nigeria currently is not enough to take many workers home. With the current minimum wage. Nigerian workers are barely surviving as prices of goods have skyrocketed and the exchange rate of the naira to the dollar has also gone up. Most of the workers cannot boost of 3 square meals per day, pay their house rents and children’s school fees as and when due, meet up with their socio-economic needs etc.

Calls for Increment in Minimum Wage Justifiable or Unjustifiable? Critically Examine

The concept of Minimum Wage

A minimum wage is the lowest remuneration that employers can legally pay their workers. Equivalently, it is the price floor below which workers may not sell their labour (International Labour Organisation, 2006). It is the minimum amount of remuneration that an employer is required to pay wage earners. For the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.

In the Encyclopedia Britannica (2010), minimum wage is defined as wage rate established. By collective bargaining or by government regulation that specifies the lowest rate at which labour may be employed.

The rate may be defined in terms of the amount, period (that is, hourly, weekly, monthly etc,), and scope of coverage. A minimum wage is the lowest wage per hour that a worker may be paid, as mandated by federal law. It is a legally mandated price floor on hourly wages. Below which non-exempt workers may not be offered or accept a job (Liberto, 2019).

Minimum wage laws were first used in Australia and New Zealand in an attempt to raise the income of unskilled workers. Although minimum wage laws are in effect in many countries. Differences of opinion exist about the benefits and the costs of a minimum wage. Arguments in favour of increase in minimum wage suggest that minimum wage increases the standard of living of workers. Reduces poverty, reduces inequality, and boosts workers morale (Bonte-Friedheim, 2017).

Monthly minimum wage in Nigeria 2018-2022

The national minimum wage for federal workers in Nigeria reached 30 thousand Nigerian naira (NGN) in 2022, which equaled about 65 U.S. dollars. On average, the monthly cost of living for an individual in Nigeria amounted to 43.2 thousand NGN in 2020, whereas this figure added up to over 137 thousand NGN for a family. In 2019, the minimum wage of 30 thousand NGN became law.

Monthly minimum wage in Nigeria 2018-2022

Nigeria and the New National Minimum Wage

In Nigeria, the history of minimum wage cannot be separated from the history of public service negotiations and increments. The first National Minimum Wage Act of 1981 prescribed a minimum wage on N125 per month. This was revised in 1991 to N250 per month. Revised again in 2000 to N5000 per month, and in 2011 to N18000 per month. On July 1, 2010, the Justice Alpha Belgore Committee submitted a bill on the National Minimum Wage amendment to the National Assembly (Fabamise, 2018).

On August 16, 2011, both the Federal Government and the Labour Union signed an agreement which revised the national minimum wage to N18000.

In other words, the law had been due for review since 2016. But the President did not set up the tripartite committee to review the 2011 minimum wage agreement. Headed by a former Head of Service, Mrs. Ama Pepple, until November 27, 2017. Since 2011 to 2018, that is seven years now, there has not been any increase. The committee submitted its report to the President on November 6, 2018. On January 9, 2019, Buhari inaugurated the Bismark Rewane-led technical committee to help the government. Find ways of implementing the new national minimum wage without disrupting the nation’s development plans.

However, for two years, workers in Nigeria under the umbrella of the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC). Have been battling with the government for an upward review of the national minimum wage from the current 2011 national minimum wage of N18000 to what is being clamoured for – N56000 and N90000. The Nigerian Labour Union had earlier submitted a proposal of N56000 and N90000 to the Federal Government as new minimum wage. Supporting the proposal, the President, Trade Union Congress of Nigeria, Mr, Bobboi Kaigama. Noted that Nigeria’s N18000 might be the lowest in Africa (Olawuyi, 2018). He argued that Nigerian workers cannot afford to wait endlessly. For the implementation of the new minimum wage in view of the economic realities as their monthly take-home pay can no longer support their demands.

In response to this clamour, and because the minimum wage is on the Exclusive List of government functions. The President, Muhammadu Buhari, on the 27th of November, 2017. Inaugurated 30-member tripartite National Minimum Committee in Abuja. To engage in discussion and make recommendations for an upward review of the national minimum wage. Which governors and senior government officials, and other stakeholders witnessed. During the inauguration, the president explained that the committee will discuss a way forward on the present N18000 minimum wage. And also ensure the possibility of paying any increase on minimum wage to state and private sector workers.

This is because the review of the wage has been due for over two years to enable the National Assembly give it an accelerated passage.

On January 22, 2019, the President took the report of the Ama Pepple committee to the National Council of State for approval. The day after, on January 23, he transmitted the National Minimum Wage Bill to the National Assembly. Six days after, acting with the speed of light, precisely on January 29, 2019. The House of Representatives passed the bill, a day after conducting its public hearing.

The Senate however waited till after the 2019 general elections to pass the bill. It did so on March 19, 2019. The bill was then sent to the President for assent on April 2. The new law had N30, 000 as minimum wage for Nigerian workers and its implementation starts immediately.

The signing of the new minimum wage of N30,000 into law by President Muhammadu Buhari on April 18, 2019, threw the labour community into a joyous mood. This is a political masterstroke by the President

coming barely two weeks to the May 1 Workers’ Day celebration. The signing of the bill into law now “makes it compulsory for all employers of labour in Nigeria to pay their workers the sum of N30,000.”

For the country’s labour unions, it was a sweet victory at last. The Nigeria Labour Congress and the Trade Union Congress of Nigeria in separate statements commended the President for signing the bill into law.

Yes, it was a long-drawn battle to get the current minimum wage. Recall that the state governors had never been in support of the N30,000 minimum wage. They were initially rooting for N22,500. Later, they agreed to N27, 000. In fact, the National Council of State was on the side of the governors when it met on Tuesday, January 22, 2019. The Council approved a dual minimum wage. While it pegged the National Minimum wage at N27,000 for the least paid workers in the states and the private sector. It approved N30,00 minimum wage for Federal Government workers.

Recall that in 2015, at the first meeting that President Buhari had with the governors, some of their requests were for the President to give them bailouts to be able to pay the backlog of the salary arrears they were owing their workers. Secondly, they demanded the review of revenue allocation formula in favour of the states.

Otherwise, they threatened to retrench workers. While President Buhari acceded to their request for bailouts and even shared out Paris Club refund largess to the states. Many of the governors still owe a backlog of salaries. This happened when the minimum wage was a paltry N18,000 (Ojo, 2019).

The re-negotiation of a new national minimum wage and the subsequent signing into law is imperative as the current wage is grossly inadequate. Most especially now the country is battling with recession and other socio-economic ills such as high foreign debt profile, high poverty rate, high level of unemployment, waning up of industries and companies, devaluation of the Naira, security challenges, high brain drain etc.

Initially, the delay of the Federal Government in considering and approving the N30000 new national minimum wage. The State government refusal to pay the said amount, and the threat to lay off workers were seen by most Nigerians. That both levels of government were adamant to the socio-economic plights  of Nigerian workers and the average citizens and were unwilling to introduce palliative measures.

This perceived adamant posture of the federal and state government showcased with mere words of assurance. But slow in taking action to implement the committee’s recommendations by the  President. Made the President, Medical and Health Workers Union, Mr. Biobelemoye Joshua. To react thus “the organized labour will not allow government to use the minimum wage issue to score political point. We are certain that if the government employs delay tactics for any reason labour will react” (Olawuyi, 2018).

CALLS FOR INCREMENT IN MINIMUM WAGE IS JUSTIFIABLE

The calls for increment in minimum from various quarters of labour union is justifiable. From my own point of views, the following points are is backup my claim:

• An increase in minimum wage will keep the economy rolling because as an average worker receives his wage. He has money to spend on household feeding. The average trader will sell her goods and will have enough money to purchase more and even attend to other needs
• Increment in minimum wage will bring about more money in circulation. So that there will be money for people to spend. This will likely lift the country out of
• An increase in minimum wage will motivate the workers to do more. By so doing operate at the optimum level thereby impacting positively on the economy
• Increase in minimum wage is a potent strategy to address recession as this will go a long way to ease the hardship that the average citizens of this country are facing.

• An increase in the minimum wage allows workers to have more disposable income. This will likely increase the demand for goods and services thereby improving consumer spending and consequently stimulate business
• Increase in minimum wage of workers will lead to increase in foreign exchange earnings. When there is an increase in minimum wage of workers. There will be increase in their demand for goods and services; an increase in demand will stimulate business activities – production of more goods and services.
• Increase in minimum wage will make it difficult for monopsony employers to under price wages. For example, if firms have monopsony power, they can drive wages down by employing fewer workers. However, minimum wages will make this more difficult. Therefore, a minimum wage could have a positive effect on

There is no doubt the minimum wage is a huge increase of almost 67% which is well above inflation rate.

With inflation running at about 11% the huge increase may lead to a spiral demand by the nongovernmental worker and the informal worker that constitute almost 70% of the labour force in Nigeria and this would possible lead to a demand pull inflation, and a further increase in unemployment as a result of a seemingly inability of the employer to assimilate the new minimum wage, and consequently to keep on to their workers and to employ new staff because of the wage demand.

The government in a bid to stir the economy into equilibrium position could in fact end up plunging the country into yet another recession that could result from a deflationary policy measure.

This not to say minimum wage is bad for Nigeria but the government would have worked out all the economic, political and social implications expediently enough before yielding to pay a whopping 66% increase.

• While increasing the minimum wage, the government should create an enabling environment for people through investment in massive infrastructure. Other basic amenities so as to drive down cost of production.
• The government should create wealth for the country in order for it to have more money to sustain and possible increase the minimum wage. Currently, what the federal and state governments are saying is that there is no money. If this is true, where will the money required for the minimum wage increase come from?

• State governments should choose to use the federal wage or make their own laws indicating the amount they can pay as the new minimum wage given the consequential effect (cost) of wage adjustment for other categories of workers and citizens as a result of increasing the minimum wage.
• Although revenue from taxation has grown over the years. Efforts of the government and revenue generating agencies to improve tax revenue have yielded limited progress. While collection processes have improved, other areas for improvement exist such as limited tax coverage that mitigates the collection efforts. To ensure that efforts yield the much-needed progress and beyond the existing collection process, there should be the widening of Nigeria’s tax net.
• There should be the capturing of a wider range of informal sector in each state and at the federal level through similar initiatives. This is vital to adding more taxpayers into the tax net.

• The federal government should inaugurate a committee to negotiate the consequential adjustment in salaries arising from the new national minimum wage. The members of the committee should include the Ministers of Labour and Employment, Finance, Budget and National Planning, Health, Education and the Attorney General of the Federation and Minister of Justice.

Conclusion

Minimum wage no doubt enhances the purchasing power of workers. The signing into law of the new national minimum wage by Nigeria’s President remains a political masterstroke that endeared the Nigerian workers and populace to his administration.

However, the Federal Government must ensure that the economy becomes more productive to sustain the approved new national minimum wage of N30,000. This is necessary as the prices of commodities have started going up even when employers are yet to commence the payment of the new national minimum wage.

References

Burkhauser, R. V. (2010). Minimum wage. Geneva: International Labour Office.

Burkhauser, R.V. (2014). Why minimum wage increases are a poor way to help the working poor. IZA Policy Paper Series (No. 86). Institute for the Study of Labour (IZA). Retrieved from http://ftp.iza.org/pp86.pdf

Business Dictionary (2014). Complete and Unabridged, 12th Edition.

Cambridge Academic Content Dictionary. (2008). Illustrated edition. Cambridge: Cambridge University Press.

Maduawuchi, T. (2017, October 12). Wages: definition, types, wage determination. Nigerian Infopedia.

Retrieved from https://nigerianinfopedia.com/wages-definition-types-wage-determination/ Makinde, F., Awoyinfa, S., Nwogu, S., Onuba, I., Nnodim, O & Utebor, S. (2017, February 1). Will an

increase in minimum wage help economy? Punch. Retrieved from https://punchng.com

Ojo J. (2019, April, 24). N30,000 new minimum wage: Matters arising. Punch. Retrieved from https//punchng.com

Olawuyi, I. (2018, March 1). Expectations and challenges of the new national minimum wage. Pulse. Retrieved from https://www.pulse.ng/news/nigerian-economy-expectations-and-challenges-of-the- new-national-minimum-wage/lnxg9d4

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