Minimum wage, maximum palaver, by Jerry Uwah

Nigeria’s minimum wage is something of a starving wage.

At the current official exchange rate of N306 to the dollar, Nigeria’s minimum wage of N18,000 per month amounts to $58.8.

That is about what the least paid worker in the United States of America gets for six hours job.

That probably explains why Nigeria is now derisively tagged the world’s headquarters of poverty.

The country’s minimum wage can no longer feed, clothe and provide accommodation for one adult.

Ironically many family heads use the minimum wage to cater for a wife and six children.

In some extreme cases the miserable minimum wage provides for the welfare of four wives and 20 children.

There is need to raise the minimum wage but the facts on ground suggest that higher minimum wage would engender maximum palaver.

Productivity in the country is very low and the civil service is absurdly over-bloated.

If the review of minimum wage is predicated upon productivity, no one in the public service would be considered for higher pay.

The low productivity is partially responsible for the parlous state of the economy and governments’ inability to pay salaries.

The federal government spends 70 per cent of its annual budget on salaries and overheads, leaving very little for investment in decaying infrastructure.

A new minimum wage might push it perilously close to 80 per cent.

Government borrows a minimum of N40 billion monthly to pay salaries.

The states and their local governments are not as credit worthy as the federal government.

That explains why 26 states and their local governments owe several months of workers’ salaries.

The situation would worsen when minimum wage is raised significantly.

Most of the states would seriously consider retrenchment when the new minimum wage is imposed on them in the face of mounting salary debts.

A minimum wage hike in the public sector would elicit a similar response in the organised private sector.

Workers in the organized private sector expect what happens in the public sector to be extended to them.

It is politically inexpedient for state governments especially in an election year to retrench workers to enable them pay the new minimum wage.

The state governments would therefore threaten, but might actually not carry out retrenchments even if the resource to pay the new minimum wage is just not there.

They would carry the burden and worsen the salary debt burden.

Employers in the organised private sector are not constrained like the politicians in the state and local governments.

The new minimum wage would almost certainly trigger massive job cuts in the organised private sector and worsen the alarming unemployment in the land.

Besides, a new minimum wage would increase the cost of production as wage bills escalates.

Employers would respond by passing part of the escalating wage bill to consumers through hikes in prices of goods and services.

That in effect would get inflation rate heading back to the higher double digit range that it was in the first quarter of 2017.

A new minimum wage would trigger inflation from two angles.

Even before the organised private sector start passing the higher cost of production to consumers through price hikes, transporters and retailers in the country’s unwieldy informal sector would take a pound of flesh from the workers new pay.

Retailers would hike prices arbitrarily in a desperate bid to catch up with the workers new pay.

Transporters would hike fares for commuters and goods haulage thus triggering fresh price hike on food items.

At the end of the day, the low income earner might be the first casualty of the new minimum wage as inflation takes a toll on his take-home pay.

Nigeria is by no means a poor country.

The poverty in the land is inflicted on it by a succession of corrupt and incompetent rulers who apportion the largest chunk of the country’s revenue to less than 2, 000 politicians and top civil servants.

The low income worker needs higher income.

That is why no one could wish away the demand for an increase in minimum wage.

The three tiers of government can reduce the burden of the new wage bill by sanitizing the unwieldy civil service which provides jobs for thousands of workers who only show up on pay day.

The recommendation of the Stephen Oronsaye Committee on restructuring the civil service should be dusted up and implemented.

The committee had recommended the merger or scrapping of scores of federal government agencies to reduce cost of governance.

No one in the federal government has the political will power to implement it.

The high wage bill to be imposed by the new minimum wage calls for just that.

The new minimum wage might be implemented with ease if leakages enhanced by corruption are blocked.

Government must work hard to reduce the cost of governance to free resources for the rehabilitation of decaying infrastructure, thus empowering the private sector to create jobs.

The army of ghost workers and pensioners in public pay rolls must be eliminated.

Besides, the time has come to dismantle the unwieldy uniform pay structure in a federation like Nigeria.

Zamfara and Lagos states cannot be compelled to pay the same wages.

No tags for this post.




Be the first to comment

Leave a Reply