Salary increase: The implication and Labour’s role, by Hassan Gimba

The organised labour finally called out its members on a nationwide warning strike Thursday after growing fed up, rightly or wrongly, with what it saw as federal government’s dithering on the issue of negotiating and implementing a new national minimum wage.
It is not the first time government and Labour are squaring it off on the issue of minimum wage.
This time a tripartite committee comprising federal/state governments, organised private sector and civil society is having meetings with stakeholders to arrive at an acceptable minimum wage.
There have been many commissions set up even before independence to consider the nation’s pay structure in order to arrive at an enduring one befitting of an income policy.
The major ones were the Hunt Commission (1934), Bridges Committee of Enquiry (1941), the Tudor Davis Commission (1945), the Harragin Commission (1946), the Miller Commission of 1947, the Gorsuch Commission (1955), the Newns Commission, the Elwood Grading Team (1956) and the Mbanefo Commission of 1959.
Others were the Morgan Commission (1963), the Adebo Commission (1970 – 1971), the Public Service Review Commission (Udoji Report) (1974), the Cookey Commission (1981), the Fatai Williams Committee (1990), the Commission on the Review of Higher Education in Nigeria (Longe Commission), the 1994 Review Panel on the Civil Service Reforms (Ayida Panel) (1994), the Vision 2010 Committee Report (1997) and the Committee on Harmonization of Remuneration in the Public Service (1998).
The increase in salary is supposed to cut across the three tiers of government, and even the private sector.
Afterall, everyone goes to the same market.
Salary increase has many advantages.
There will be a considerable increase in monthly cash flow.
The recipient has more money coming in, meaning more funds to spend.
This will lead to people meeting their financial obligations more comfortably.
This increased purchasing power in many hands will galvanise production and improve the overall economy.
Productivity as a consequence will get a boost because the worker who gets a pay rise will be motivated to embrace his work with the seriousness it deserves.
Thus there would be more efficiency and effectiveness in the workplace, ultimately leading to increased productivity.
Walmart, an American powerhouse, found itself floundering for years before making a sweeping change to how it pays its employees.
As the New York Times reported, “the company’s revenue fell for the first time in its nearly half-century run as a public company in 2015, and sales fell for five straight quarters”.
Customers simply weren’t happy about long lines, messy bathrooms, and MIA staff — and only 16 per cent of stores were meeting customer service goals, the Times story noted.
So, a company known for pennypinching announced in early 2015 that it was going to start paying its employees more.
And it seemed to make a difference.
Early results were optimistic, as sales started to rise and the rate of stores hitting their customer service targets shot back to 75 per cent by early 2016.
In April 2015, Dan Price, the owner and CEO of Gravity Payments, made a revolutionary decision by cutting his salary from $1.1 million to $70,000 a year in order to fund a pay check raise for his employees.
He raised the minimum wage of his workers to $70,000.
Surprisingly, profits rose even after that momentous raise.
Productivity jumped by 30% to 40% and his profit more than doubled.
And while the aim is to alleviate the sufferings of workers through increasing their purchasing power and enabling them to cope with the high cost of living, the consequences are that many jobs will be lost and very little created.
This is because employers will pay higher wages and balance it out by cutting down the workforce.
The implication is that a worker may end up doing the work of two or more others.
Considering our unemployment figures, people who have been desperate for jobs will sink further into desperation as more will join them through retrenchment.
The purchasing power of more Nigerians would be eroded and, therefore, side effects such as inflation and possible bankruptcy by private companies may increase.
States that have been struggling to pay their workers would struggle more.
Those with small internally generated revenue will depend more on federal allocations.
Infrastructural development will dwindle as recurrent expenditure increases.
In Nigeria, once there is increase in salary, the price of everything goes up and nothing that has gone up ever comes down again going by past experience.
The 1972 Udoji Commission recommended, among others, a Unified Grading and Salary Structure (UGSS) which would embrace all posts in the Civil Service from the lowest to the highest.
At a time when the naira was stronger than the dollar(about N60/$100), the commission increased the annual minimum wage from N312 to N720, the equivalent of $1,200.
One of the backlashes of the Udoji Commission was the official backdating and subsequent implementation of the recommended increases in wages and salaries (which ranged from 12 to 30 percent).
Consequently, it generated an inflationary spiral during the period.
With Nigeria’s population nudging 200 million, how many are civil servants? Maybe not up to 5% of this figure.
In 2014 the Association of Senior Civil Servants of Nigeria (ASCSN) described as bloated the figure of 1.2 million workers announced before the House Committee on Health by the director-general of the Budget Office of the Federation (BOF) as the current staff strength of the Federal Public Service.
It said that available records put the right figure at about 870,000.
The ASCSN secretarygeneral also doubted that N1.8 trillion was being spent annually on public servants as personnel costs.
Assuming the number of government workers in Nigeria is up to five million, which is a generous figure, why draw dire consequences on other citizens through the pampering of a negligible number? Governments at all levels provide for only civil servants while others are left to carry their own can.
When you look at housing policies, health insurance, etc., it is all about the civil servants, yet everybody pays tax.
Rather than increase salary, government should do all it can to strengthen the naira.
A very strong naira will see to market forces pushing down the price of commodities, thereby increasing the purchasing power of Nigerians.
Udoji’s minimum wage of N720 had more purchasing power than today’s minimum wage of N18,000.
Just imagine $1,200 as basic salary today! N1 million as minimum wage will help no one as long as the naira is weak.
What Labour Should Have Done There are some states that do not pay salaries regularly and even those that pay, many do not pay the current minimum wage.
These are areas the Nigerian Labour Congress would have done well for workers but they were missing in action.
In many instances, pension and gratuity are delayed or denied outright.
It is well known that the powers that be secure juicy appointments for their children in choice organisations where salaries and other emoluments are far above the average civil service salary scale.
And labour chieftains, whose children also get such preferential treatment, keep mum about it.
While such injustice, which continues even now, does not augur well for national development, one is wont to ask the rationale behind a first class History graduate earning five times less than his classmate with a third class who works in the NNPC, CBN, FIRS, etc, just because he got employed as a teacher, or a freshly employed driver in such offices earning more than a senior officer on grade level 12 in another government agency.
What kind of nonsense is that? If Salaries Must Be Increased But if salaries must be increased – and government will do it anyway because it is a populist one and elections are around the corner – government would do well to explore the idea of price control.
While the advantage is that it may lead to lower prices for consumers, the consequence is that it may lead to lower supply and reduction of quality.
However, price stability helps in avoiding both inflation and deflation.
Another idea that government must explore is a drastic cut in salaries and allowances of public officers, especially those of elected officials, political appointees and heads of MDAs.
These people collect mind boggling salaries and allowances in millions of naira.
The saved money can be used to finance the salary increase.
This way, the negative consequences will be mitigated.