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Will New Minimum Wage Improve Workers Productivity?



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 N18, 000.

However, the antagonist of a new minimum wage argue that an increase to workers earning will lead to inflation and may not even necessarily increase productivity of civil servants, who are the major  beneficiaries of a new minimum wage

One of Nigeria’s leading economists and Chief Executive Officer of Economic Associates, an economic research firm, Ayo Teriba, who spoke with LEADERSHIP, said that the real economic issue here was whether the current minimum wage rate was optimal or sub-optimal.

“This means that do workers receive an income that allows them to live reasonably? In my opinion, if you divide 18,000 by 30 days, that is N600 per day,” Teriba said. “What can anybody do with N600 per day? If you go to N56, 000, that brings it to a little bit over N1, 800; and anyone who says that figure might be inflationary is exaggerating. That’s less than what people earn as unemployment allowance in some countries. The amount is not even significant enough to affect money supply. I don’t think we should be talking about inflation.”

On the limitations of government revenue, he said, “They should find money. States are in the business of finding money to govern. If you cannot raise money, leave your seat for someone else who can.”

Also, a financial expert, Mr. Johnson Akintunde, spoke in a similar vein. He emphasised the need for the increase and went further to suggest it could help in improving the country’s economic fortunes.

According to him, “An increase in the minimum wage allows workers to have more disposable income, and that means the demand for goods and services will improve, which means consumer spending will also improve and in return stimulate business activity, in the sense that those businesses involved in producing the goods and services will need to produce more.

“But because a lot of production is not domesticated, there might also be a trigger in the increase in demand for foreign exchange for importation. But, on a balance, I think an increase in wages will trigger positive economic activity as a result of the increased demand for goods and services.”

However, Akintunde noted that the increased burden on government and some entrepreneurs might dampen the demand for labour. “It also means some states will be forced to retrench and it will discourage a lot of small companies from employing because they may not be in a position to meet such obligations,” he said.

Sadly, the majority of the state governments are finding it difficult to pay even the extant minimum wage. Therefore, since they are presumably not planning the mass sack of workers in order to meet up with the obligations that will be placed on them by the new minimum wage, the state governments must work assiduously towards increasing their revenue profile. They must demonstrate renewed commitment to cutting costs and eliminating wastes in the system.

Financial experts as well as organised labour argued that this is indeed the time for the governors to be creative in the management of public finances rather than perpetuating the defeatist practice of blaming previous governments for the present state of affairs.

Mr Sunday Adebayo, a labour activist said, “Every Nigerian worker deserves to live a decent life and so must earn a decent wage. But the government must also ensure that the economy becomes productive. In addition, and perhaps more importantly, we urge the government to embrace the restructuring imperative. The truth is that the nation’s workers will fare better under a system that allows each component unit of the federation to take charge of its affairs and creatively harness its God-given resources. The healthy rivalry that will be created by such a system will encourage rapid development.”

Low Compliance

It is one thing to pass laws and another to implement them. Although the N18, 900 minimum wages was agreed to in 2011, compliance, according to a labour executive who spoke with LEADERSHIP, has remained low.

Chairman, NLC, Lagos Chapter, Comrade Idowu Adelakun, lamented that the low compliance was due to selfishness on the part of employers.

Adelakun stated, “Nigeria is blessed with abundance. Among oil producing countries, we are the ones who pay our workers the least amount of money. Still, as little as 18,000 and considering the recent economic situation in the country, some people still feel it is too big. Apart from private employers, what of our own government? The majority of state governments are not paying. Instead of paying the full N18, 000 they will be paying N9, 000, and what is that to a worker for 30 days? They only want the rich to be richer and the poor to be poorer.

“Because the minimum wage is on the Exclusive List and is a law, it is binding on everybody, and those who don’t comply are criminals. As NLC, over the past two to three years, we have gone round states protesting on the streets about this noncompliance issue.”

When asked whether the NLC had explored the option of using the judiciary to compel compliance, Adelakun said, “It is not every case you take to the court that you will win and you know that in this country, there are levels of complications in the judicial system; at the end of the day, they might say you lost.

That is why we have taken our destiny in our own hands by protesting, picketing and doing everything to make sure that we have our rights.”

On suggestions in some quarters that labour is being myopic with its demand for wage increase to N56, 000 monthly, Adelakun stressed, “If you compare N18, 000 with the current situation in Nigeria, what can that do? It is not even enough to feed a child of 12 years, talk less of a family of four. So all those saying such are only being selfish. This is why they allow corruption to grow in Nigeria, because when you are not well paid, you will look for other ways to adjust yourself. If the current government wants to eradicate corruption, they must increase workers’ salary.

Director, Social, Economic and Labour Matters at the Nigeria Employers’ Consultative Association, Olawale Timothy, said the private sector was very much ahead of the minimum wage rate.

Timothy said, “We need to segregate which employers are in the category of those who do not comply. Employers in the private sector are paying way above N18, 000. There are sectors where the minimum wage is far above N50, 000. Generally, minimum wage in the private sector ranges between N33, 000 and N50, 000. So the private sector is out of it. So, the class of employers that applies to is probably the government, especially the state governments, and it will be unfair for me to speak on their behalf. However, they are represented on the committee, so they can at least canvass and articulate their position.”

Timothy, who is also part of the 30-member Minimum Wage Committee set up by Buhari, said Nigerians “should expect fairness, consensus and what will be in the best interests of both workers and the economy at large” from the committee’s deliberations.

“As far as NECA is concerned, we will be on the side of common sense and reason; whether we increase or maintain the status quo is a function of constructive discussion and superior argument. There is no fixed position as it is now,” he said. “And this is why it is a committee work; we are all going there to discuss and look dispassionately at the positions and opinions of other people so we can arrive at a mutually beneficial position that will be acceptable to everybody.”

What is required in the end is the will of all employers of labour to pay the fixed wage. From our experience of serial default on this matter in the past, we know that the instinctive reaction of some employers would be to downsize.

We, however, enjoin them to look at the long term effects of a motivated workforce on their operations and the overall national economy, and resolve to pay the new minimum wage.

The Huddle

Labour unions have long demanded that the minimum wage be increased, citing inflationary reasons and a contracting economy. At the last Workers Day celebration, President of the Trade Union Congress, Bobboi Bala Kaigama, described the current rate as the lowest in Africa. The Nigeria Labour Congress, too, led by its President, Ayuba Wabba, has consistently promised hailstones and lightening if the government does not raise the rate to N56,000.

“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 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, 000 per month.

On July 1, 2010, the Justice Alpha Belgore Committee submitted a bill on the national minimum wage amendment to the National Assembly. The committee, among other proposals, 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.

On August 16, 2011, the two parties – federal government and labour – signed an agreement which revised the national minimum wage to N18, 900.

In light of the obvious delay in reviewing the wage, it is also relevant to note that there has not been a uniform application of the minimum wage by the three tiers of government in Nigeria. “Each of them has a unique salary structure for its public servants.





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