As we near the end of another minimum wage process, what is clear, as always, is that the gap between the demands of the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) on the one hand, and the government and the organized private sector on the other side remains huge.
What do we know? After the NLC triggered a nationwide strike two weeks ago following the rejection of the N60,000 made public by the government, the government now suggests it has reached an agreement with labour for a new minimum wage of N62,000., but labour unions disagree.
It is very easy to understand why labour unions are agitating for a significant rise in the minimum wage. The current minimum wage is ridiculous. Even an increase of the current minimum wage of N30,000 to N62,000 per month, though more than 100% increase, is less than it is in relative US dollars. In 2018, when the minimum wage was set at N30,000, it was the equivalent of 98 US dollars. At N62,000, the new minimum wage will be about 42 US dollars.
It is especially easy to understand the fierce agitation this time. As my commentary two weeks ago highlighted, Nigeria is going through the worst costs of living crisis in more than 25 years. Food inflation is above 40% and there is no sign that that is going to abate anytime soon. Indeed, the cumulative annual inflation rate since the last minimum wage in 2018 is about 100%. So, a minimum wage of N62,000 barely compensates for previous inflation, not to mention inflationary expectations that will follow increases in the minimum wage.
Also, using the proposed N62,000 minimum wage, which is an equivalent of 42 US dollars, it will still be lower than that of Bangladesh, Burkina Faso, Cameroon, Chad, Republic of Congo, but higher than that of Cuba where every citizen receives free food. Indeed, from the data I have seen, Nigeria’s minimum wage will still be lowest in the world in US dollar terms. It reminds me of last year when Piodi, an ecommerce site estimated that it will take more than five or six generations for anyone earning Nigeria’s minimum wage to earn a million US $. Given the economic crisis since last year, it will now take more than ten generations.
While these are the immediate issues, the real problem is structural. It is the awful process we use in determining the minimum wage that is the problem.
The Nigeria Labour Congress (NLC), like every labour organization anywhere in the world sees a direct correlation between a minimum wage and standard of living while businesses and government sees a correlation between it and the costs of labour and the ability to pay. Or simply, its underline productivity. It is in this context that Governor Chukwuma Soludo was quoted as saying, and I quote, “he pities the president if he accepts an unsustainable minimum wage”. But both the politicians and the labour unions are not asking the most important questions. Why are governments not able to pay workers good wages? The simple reason is that most of these workers are not “productive”, and the problem lies with the governments. They are often employed, not to be productive, but to fill spaces for political considerations. Both the governments and the labour unions are hypocrites. Indeed, it is open secret that a great number of Nigeria’s civil service is also a social service. So, the reform of Nigeria’s wage and employment policy is also critical to Nigeria’s sustainability.
The lack of an effective process for adjusting the minimum wage without agitation is the main reason why we have the current challenges with labour. An effective system will have the following features.
First, it will be a standing committee. I believe many will be surprised that there is an office called the national salaries, incomes, and wages commission in Nigeria. Established by an Act in 1993, it was set up to deal with “issues relating to salaries and wages of Nigerian workers” and “take care of annual reviews of wages and salaries in the public service”. Only the government can explain why this commission is ineffective in contributing towards a stable policy environment for the adjustment of minimum wages. So, the first thing required is a legislation of the process of adjustment of minimum wages in Nigeria.
Second feature is that there should a standard time lag for the review and adjustment of Nigeria’s minimum wage. For some countries, it every three years, and for some, it is every year. For Nigeria, it has been haphazard and only changes until labour agitates for it. That is why it is chaotic, disruptive, and inefficient. It was first done in 1981, then 10 years later in 1991, then 1999, 2000, 2001, and 2013 and the last time was 2018.
In conclusion, there are structural adjustments that need to be made to Nigeria’s labour market that will improve the wages and living conditions of those at the bottom of the pyramid.
First, the minimum wage should be set it in regional or state terms or let there be both Federal and State minimum wages. In the context, State legislations can take into careful consideration their peculiar labour market conditions, including considerable differences in regional standard of living, costs of labour, and prevalent types of work.
A single national minimum wage gives the erroneous notion that the Nigerian economy is homogenous. It is not. The economy of Lagos is totally different from the economy of Abia, Kano, Ekiti, Zamfara, etc. and these economies are different from each other. While it understandable to have a uniform minimum wage, it is not wise to have a single minimum wage for the whole country. For instance, India has more than 1200 minimum wage rates for different types of industries and skills levels and the United States have more 100 different minimum wages across the nation.
Second, minimum wage in Nigeria should be set per hour and not per month. Per hour wages have proven to be more effective in respect of effective minimum wage. It encourages flexible working arrangements and easy to monitor. For both employees and employers, flexible working arrangements that minimum wage allows helps them to manage and improve their working relationships. It means the hours spent at work is defined, and so is the work to be done in that hour. The labour is then free to increase his or her income by doing multiple part time work.
For more of my thoughts, please visit tb.africa
I thank you.
The problem with Nigeria’s minimum wage is the process. – Ogho Okiti
As we near the end of another minimum wage process, what is clear, as always, is that the gap between the demands of the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) on the one hand, and the government and the organized private sector on the other side remains huge.
What do we know? After the NLC triggered a nationwide strike two weeks ago following the rejection of the N60,000 made public by the government, the government now suggests it has reached an agreement with labour for a new minimum wage of N62,000., but labour unions disagree.
It is very easy to understand why labour unions are agitating for a significant rise in the minimum wage. The current minimum wage is ridiculous. Even an increase of the current minimum wage of N30,000 to N62,000 per month, though more than 100% increase, is less than it is in relative US dollars. In 2018, when the minimum wage was set at N30,000, it was the equivalent of 98 US dollars. At N62,000, the new minimum wage will be about 42 US dollars.
It is especially easy to understand the fierce agitation this time. As my commentary two weeks ago highlighted, Nigeria is going through the worst costs of living crisis in more than 25 years. Food inflation is above 40% and there is no sign that that is going to abate anytime soon. Indeed, the cumulative annual inflation rate since the last minimum wage in 2018 is about 100%. So, a minimum wage of N62,000 barely compensates for previous inflation, not to mention inflationary expectations that will follow increases in the minimum wage.
Also, using the proposed N62,000 minimum wage, which is an equivalent of 42 US dollars, it will still be lower than that of Bangladesh, Burkina Faso, Cameroon, Chad, Republic of Congo, but higher than that of Cuba where every citizen receives free food. Indeed, from the data I have seen, Nigeria’s minimum wage will still be lowest in the world in US dollar terms. It reminds me of last year when Piodi, an ecommerce site estimated that it will take more than five or six generations for anyone earning Nigeria’s minimum wage to earn a million US $. Given the economic crisis since last year, it will now take more than ten generations.
While these are the immediate issues, the real problem is structural. It is the awful process we use in determining the minimum wage that is the problem.
The Nigeria Labour Congress (NLC), like every labour organization anywhere in the world sees a direct correlation between a minimum wage and standard of living while businesses and government sees a correlation between it and the costs of labour and the ability to pay. Or simply, its underline productivity. It is in this context that Governor Chukwuma Soludo was quoted as saying, and I quote, “he pities the president if he accepts an unsustainable minimum wage”. But both the politicians and the labour unions are not asking the most important questions. Why are governments not able to pay workers good wages? The simple reason is that most of these workers are not “productive”, and the problem lies with the governments. They are often employed, not to be productive, but to fill spaces for political considerations. Both the governments and the labour unions are hypocrites. Indeed, it is open secret that a great number of Nigeria’s civil service is also a social service. So, the reform of Nigeria’s wage and employment policy is also critical to Nigeria’s sustainability.
The lack of an effective process for adjusting the minimum wage without agitation is the main reason why we have the current challenges with labour. An effective system will have the following features.
First, it will be a standing committee. I believe many will be surprised that there is an office called the national salaries, incomes, and wages commission in Nigeria. Established by an Act in 1993, it was set up to deal with “issues relating to salaries and wages of Nigerian workers” and “take care of annual reviews of wages and salaries in the public service”. Only the government can explain why this commission is ineffective in contributing towards a stable policy environment for the adjustment of minimum wages. So, the first thing required is a legislation of the process of adjustment of minimum wages in Nigeria.
Second feature is that there should a standard time lag for the review and adjustment of Nigeria’s minimum wage. For some countries, it every three years, and for some, it is every year. For Nigeria, it has been haphazard and only changes until labour agitates for it. That is why it is chaotic, disruptive, and inefficient. It was first done in 1981, then 10 years later in 1991, then 1999, 2000, 2001, and 2013 and the last time was 2018.
In conclusion, there are structural adjustments that need to be made to Nigeria’s labour market that will improve the wages and living conditions of those at the bottom of the pyramid.
First, the minimum wage should be set it in regional or state terms or let there be both Federal and State minimum wages. In the context, State legislations can take into careful consideration their peculiar labour market conditions, including considerable differences in regional standard of living, costs of labour, and prevalent types of work.
A single national minimum wage gives the erroneous notion that the Nigerian economy is homogenous. It is not. The economy of Lagos is totally different from the economy of Abia, Kano, Ekiti, Zamfara, etc. and these economies are different from each other. While it understandable to have a uniform minimum wage, it is not wise to have a single minimum wage for the whole country. For instance, India has more than 1200 minimum wage rates for different types of industries and skills levels and the United States have more 100 different minimum wages across the nation.
Second, minimum wage in Nigeria should be set per hour and not per month. Per hour wages have proven to be more effective in respect of effective minimum wage. It encourages flexible working arrangements and easy to monitor. For both employees and employers, flexible working arrangements that minimum wage allows helps them to manage and improve their working relationships. It means the hours spent at work is defined, and so is the work to be done in that hour. The labour is then free to increase his or her income by doing multiple part time work.
For more of my thoughts, please visit tb.africa
I thank you.
Ogho Okiti
ThinkBusiness Africa
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