Labour’s minimum wage debacle
• Impact Of Policy Choices, Agreements Informed Review, Says TUC
• ‘Why Calls Are Misplaced, Insensitive
Man is essentially driven by survival. This need sets him to work each day, and even after surviving on certain fronts, he still moves on to another, finding as he progresses, more reasons to aspire for a better, more fulfilling life.
This underscores the crux of the matter, as workers, at every point in time, seek comfort in their effort to acquire the means—this time, money— to partake in the transaction that is life.
But doing this may have been particularly hard for the average Nigerian worker, who has had to survive in the last five years — many would say for a long time — with resources below what is due him, as a result of shifting economic fundamentals, especially as relates to the minimum wage pegged at N18,000 in 2011.
This must have led to recent calls for an upward review of the wage to N56,000 by Labour Unions,who argue that not only have inflation and the exchange rate reduced workers’ purchasing power, but that the inability of state governors to pay the old, as well as, the newly proposed wage, was because they were lazy and weren’t tasking themselves enough to engage in meaningful development of their domains.
Chairman of the Nigeria Labour Congress (NLC), Mr. Ayuba Wabba said both the NLC and the TUC made the formal demand on the proposed national minimum wage to the Federal Government, noting, “The demand has been submitted officially to government and we hope the tripartite system would look at the review and a committee will actually be set up to look at it.
“Our argument is that though it is true the economy is not doing well, but the law stated that wages for workers must be reviewed after every five years. So, the Federal Government must look into the issue and workers should not be seen as sleeping on their rights,” he said.
But this move has been greeted with mixed reactions from different quarters. While many say the call is insensitive of government’s recent handicaps at steering the economy aright in the face of dwindling oil revenue and need to diversify the economy, others argue that the agreements are sacrosanct and that necessary reviews must be formulated to placate workers’ suffering in the light of the hardship they face because of government’s recent policies.
The acting Secretary General of Trade Union Congress (TUC), Comrade Simeso Amachree, said the calls are not just overdue, but necessary in the light of the present economic realities, especially as the wages in Nigeria are a sharp contrast to what obtains in some other countries.
Said he: “The rationale is apt. We had the first national minimum wage Act as far back as 1981. The amount then was N125, and since then, we have had periodic reviews. It is not only Nigeria that does that.The national minimum wage does not just refer to the entire remuneration; it refers to the minimum salary a worker is entitled to and below which no employer can pay.
“In 2011, we had the last review of the minimum wage. In 2,000, it was 5,500 and after intense deliberation among concerned parties, it was pegged at N18,000 in 2011 by the Alfa Belgore-led Committee. There was a review clause in the Act that provides for a review of the minimum wage every five years. It was due as at March 22, 2016.”
Noting that Nigeria is competitively one of the lowest paying countries in the world, when it comes to minimum wages, he said, “When the 2011 Act was signed, the exchange rate between the Naira and the Dollar was pegged at N152 to $1. Today, it is between N310 and N320 to one dollar in 2016, never mind the so-called official rate of N197. At that time, the official rate was N152, while it was N155 to N158 at the parallel market. So, the difference was not much.
“This means that the Naira has lost at least 50 percent of its value within the time under review. This also means that N18,000 is so small, because when you consider the naira-dollar exchange, the amount sums up to less than US$60.”
He added that as an oil-based economy, Nigeria compares badly with fellow Organisation of Petroleum Exporting Countries (OPEC) members, stating, “If we look at Ecuador, for instance, the minimum wage is about $354 per month, which translate to about N120,200; in Iran, it is $226 and in Kuwait, it is $216. And here we are, talking about $58.In Africa, Congo has its ownat $170, while Egypt has $174; Gabon, $285 and Chad, $120.”
On the economic front, he argues that the combo of inflation and exchange rates have worsened the Nigerian worker’s plight, stressing that there has not been a commensurate raise to meet increased rates in the recent past.
“When we consider the inflation rate, we would agree that the increase is quite sharp. In 2011, for instance, the inflation rate was 10.30 per cent, and it increased to 12 per cent in 2012. Thereafter, it reduced to eight per cent, but in 2015, it rose to 9.55 per cent. As we speak, it is about 12.8 per cent as against the 10.30 as at 2011. Goingby this, you can see there is a need for wage review.
“Another reason is that Nigeria is an import-dependent nation and we know that aside the forex issues, the price of oil has crashed in the international market. But locally, the price of petroleum product has increased. In 2011, we bought a litre of petrol for N65, but today, it goes for N145.We know that almost everything in Nigeria is tied to the price of petroleum, because things have to be transported. This is regardless of whether it is house rent, food, clothes or any other thing.”
On whether he thinks that the states can pay the new minimum wage even with mounting wage bill and complaints of empty treasury, he said the request is not necessarily impossibleas it only takes political will to mandate governors to meet the demands.
“They can pay. Even those who have not paid the N18, 000 can meet the new demands. What happened these past years was that the governors have been unwilling. I think the real issue is whether funds are available. And I believe we have the funds.
“Although most of them would say that after paying workers from the Federation Allocation every month, there is little left for them to undertake the development of their states, but we ask, why are they not looking inwards? Every state in this country has enough natural resources and facilities, and of course, they can source income from tax. They have the wherewithal to do everything, including payment of salaries and development. But many of them have been lazy; they prefer going cap-in-hand to the Federal Government for funds.”
Associate Professor and Policy Analyst in the Department of Economics at the University of Lagos, Femi Saibu, said the call for minimum wage increase is not just unconscionable, but misplaced.
Said he: “I doubt, for now, that there is any justification for increasing the minimum wage. This is because we should actually be talking of downward review or appropriateness of wage policies. We should be asking: Is what is being paid equivalent to the work done? Let’s juxtapose productivity with wages.
“Economically, one should earn according to his or her contribution to production. Therefore, if your productivity has not increased and you’re asking for increase in wages, then you should be able to make provision for where such increment should come from.”
He said while it was necessary to sympathise with everyone and acknowledge that things are getting bad, increase in wage bill would not necessarily increase people’s well-being.
“Experience has shown overtime, that there has never been a time that wages were increased by law and there was not a corresponding increase in prices.Even if the law backs this, it is something that is not likely to be implemented. The revenue base in the country cannot even pay existing workers and we are now asking government to increase their wage bill, when they are trying to reduce it. Some of these states are not even paying the old rate. This is not the time to ask for increase in minimum wage,” he said.
He noted that the unions are right in raising issues of the inadequacy occasioned by falling purchasing power, but that the real discussion should be on how government can enact polices, especially those that would impact on infrastructure, that would lead to a decrease in commodities prices.
“There is a fundamental issue that the unions are trying to raise, but the approach is wrong,” he said. “What they are saying is that people’s purchasing power has been eroding overtime. Therefore, government should look for ways to increase the purchasing power. However, purchasing power is not necessarily improved by minimum wage increase, but by reducing the price of goods throughincreased supply.
“If we can have good electricity supply, roads, infrastructure, as well as increase in productive activities whereby people can be employed, automatically, their well-being would improve.
“The major challenge we have in the country is that as we have more unemployed people, the dependency ratio is very high. This increases the burden, as well as reduces the quality of wellbeing of those that are working. And that precisely is the problem. Anything that can be done to get more people to work would reduce the dependency ratio and consequently increase purchasing power.
“Hence, more people would have more money. That is the way to go; it is not to increase the minimum wage because that would increase unemployment and inflation, all of which would erode whatever gains the workers think they would achieve with the increase in minimum wage.”
On arguments that wage increase would impact on government spending and further fatten the wage bill, he described the calls as faulty, noting that the burden of creating wealth does not rest on governors alone, but also on the workers themselves.
Said he: “The argument that putting pressure on government to increase the wage bill will make them creative is faulty. But if the workers work to increase the internally generated revenue of the state, then it is easy for them to ask for the increased share of what they have generated. But in this case, they have generated nothing and are asking government to look for money to service the proposed minimum wage.
“Where will government get that? The money to be shared must be gathered first. Is it the governor that would be looking for money to pay salaries, or the workers should work to earn their pay? Nigeria Labour Unions need to find ways to get state governments to provide opportunities to create wealth. The wealth is shared, so we have to get to work.”