Minimum wage, maximum wahala

Labour is once more up in arms. It is easy to see why. The times are hard for everyone. It is the business of labour to make life easy for workers in the public as well as the private sectors of the economy. Parlous times like these give labour leaders the opportunity to assert their […]

Labour is once more up in arms. It is easy to see why. The times are hard for everyone. It is the business of labour to make life easy for workers in the public as well as the private sectors of the economy. Parlous times like these give labour leaders the opportunity to assert their power in their eternal struggle with employers on behalf of their employees.

One of these is the demand for a minimum wage so the cost of living can keep pace with an economy tossed in the wind of internal and global changes and uncertainties. An increase in the minimum wage means more money in the pockets of workers and, with the new spending power, the good life rolls along for everyone, market women not excepted. The demand for a minimum wage has become a permanent feature of the struggle by labour leaders for a fair deal for workers. We must have lost count of the number of times labour unions threatened to call or called out their members on strike to win the struggle.

In 1981, the late President Shehu Shagari became the first president to formally institute the minimum wage of N1,500 per month for civil servants. The average pay before that was, by today’s standards of jumbo earnings and payments, a paltry N18 per month. It reflected the real wealth of the nation and the good health of the national economy managed by the Oxford and LSE trained super permanent secretaries in the General Yakubu Gowon administration.

The purchasing power of the Naira was so strong – and two half times stronger than the US dollar – that those who earned N18 per month did not exist; they lived well enough. A systematic erosion of the purchasing power of the Naira pushed the country into new regimes of minimum wage to help workers. In 1991, the Babangida military administration raised it to N3,000 per month. And in the year 2000, it went up to N5,500 per month.

In 2011, the Jonathan administration raised the minimum wage to N18,000 per month. The current minimum wage of N30,000 was won by labour in a protracted struggle. It eventually came into effect from October 2019.  Under the National Minimum Wage Act, the minimum wage is the same in both the public and the private sectors of the economy.

Inflation has made nonsense of the current minimum wage, forcing labour leaders back into the trenches to ask for a new minimum wage. Their demand ranges from N50,000 per month to N100,000 per month. They believe that either figure will be a living wage. A living wage is difficult to measure, given the parlous state of the national economy. Inflation dogs every attempt to lower the cost of living to a tolerable level. It will be nice to see workers earn more, save some and live rather than exist from pay cheque to pay cheque. But the minimum wage is not the best reward system for workers. It is, in the current political lingo, a palliative. If the economy bleeds, the minimum wage becomes a maximum wahala for employers.

The right of labour to fight for workers is beyond dispute. That right also comes with responsibilities. Exercising those responsibilities do not derogate from that right. The times are hard and getting harder. The challenge the nation faces is far beyond making workers feel good with a new minimum wage. Workers are the backbones of economic and social development in every society. The first duty of labour leaders is to make their members put their shoulders to the plough to rescue the broken economy and ensure that it gets its health back. Matters can only get worse if they pile it on with a strike action to back up their demands.

The minimum wage has not been entirely a blessing for workers. A new minimum wage heightens inflation and takes away from the workers what the minimum wage promises them. The inability of most of the state governments to pay the N18,000 and the current N30,000 minimum wages decreed in 2011 and 2019 respectively is a curse on the minimum wage. Only 15 of them pay the current minimum wage of N30,000. A new and higher minimum wage merely sitting between files do the workers no good. Truth be told, neither the N18,000 minimum wage nor the N30,000 minimum wage is a living wage in our inflation ravaged economy. It is a management wage, as in we dey manage.

The minimum wage palaver raises some fundamental issues and gives us as good an opportunity as any, to respond to them in an honest, non-sentimental way. The conflation of wage with salary is wrong and should be discontinued. In other climes, such as the United States of America, the minimum wage is the hourly payment, not the monthly salary. The conflation of the two is a problem for the economy itself because it imposes on private investors the burden they should not bear. The private investor works for his money. The government lives off rents and oil revenue.

Our centralised federal system empowers the centre to assume the right to impose on the states burdens they cannot bear – and force them to bear them, even if, in this case, their mosquito-like financial legs crumble under them. Ours is a united and unitary federal system in which the states have a uniform pay structure for their civil servants and public officers. And so, Kebbi State, with low internally generated revenue, must pay the same salaries and allowances to its civil servants and public officers as Lagos State, about the only state that can survive without the monthly handout from the federation account.

The states must be set free so that each of them can do what they can, not what they must. Each state should feel free to negotiate a minimum wage with its workers. The truth is that we are not developing in any meaningful way. Our arrested infrastructural development points to a deeper malaise in the system, namely lack of investments. It is not news that the federal, state and the local governments commit between 75 and 90 per cent of their annual budgets to recurrent expenditure.

This lopsided vote is a clear and dangerous recipe for a backward national development. No country has ever approached this dangerous threshold and witnessed itself make the leap as the Asian Tigers did about a decade ago. We cannot spend the bulk of our revenue on the payment of salaries and allowances of civil servants and public officers and expect a miracle in our national development. Governments do not exist to pay salaries and allowances. Shifting the paradigm would be painful but we have no choice if, indeed, we want to see a meaningful development at all levels in our rich but poor country.