Labour And The New Minimum Wage Debacle, – By Kazeem Akintunde
The Nigerian Labour Congress (NLC) and it’s twin sister, the Trade Union Congress (TUC), have begun another round of negotiations with the federal government and other stakeholders on the amount of money the least paid workers in Nigeria should earn going forward. The two trade unions believe that the N30,000 minimum wage fixed by the Muhammadu Buhari administration in April 2019, after series of negotiations with labour leaders, is no longer realistic in today’s Nigeria. The Bola Ahmed Tinubu’s administration seems to agree with the labour unions as it’s twin policies of removal of fuel subsidy as well as the floating of the Naira have eroded the purchasing power of workers and their current take-home pay is not enough to take them anywhere.
The Federal government has therefore, set up a 37-member committee to work out modalities for the increase in workers’ salaries and to determine what the least paid worker should earn in the country. The 37-man tripartite committee, comprising six governors, some cabinet ministers, representatives of the organised labour and the private sector has been tasked with reviewing and recommending a new national minimum wage ahead of the expiration of the current wage instrument which President Tinubu fixed for April this year.
The committee began sitting last week, and labour leaders in each of the six geo-political zones have started making presentations on what their members should earn in their respective zones. Labour Unions in the South West believe that N794,000 should be the minimum wage for workers in the zone. Their counterparts in the North Central feel that N709,000 should be enough for the least paid workers, while Union leaders in the South East are of the view that N540,000 should be the new minimum wage. Those in the South-South feel that N850,000 should be their minimum take-home pay, perhaps due to the fact that crude oil majorly comes from that region. However, workers in Plateau State believes that N80,000 should be enough for the least paid workers in their state. The TUC believes that N447,000 should be the new minimum wage for Nigerian workers.
I still do not understand what the NLC intends to gain singing discordant tunes at the ongoing public hearing across the six geo-political zones in the country. Why can’t the labour union agree on a figure that should be canvassed across the six geo-political zones as it was done by the TUC? In essence, the NLC, may have shot itself in the foot as there may not be an agreed minimum wage before the April date fixed by President Tinubu. By their action, they are indirectly prolonging the suffering of their members, and if care is not taken, the negotiations may drag beyond the April deadline.
Already, some state governors have pleaded with members of the committee to allow them negotiate a new minimum wage with their workers. Toeing this line is the Nasarawa State Governor, Abdullahi Sule, who is of the view that economic realities may not encourage the state to pay a new minimum wage beyond its financial capability.
In actual fact, that it the way to go. Outside of the national minimum wage, every state should be allowed to determine what it can pay its workers. In the United State of America, the 2009 federally mandated minimum wage is $7.25 per hour, but in the true spirit of federalism, 31 out of the 50 American states pay a minimum of $8.25/h, with the District of Colombia highest at $17 per hour, followed by Washington ($16.28/h) and California ($16/h).
Aside Sule of Nasarawa State, other governors are already calling for a constitutional review to jerk up what state governments get monthly from the federation account. The current FAAC revenue-sharing formula allocates 52.68 per cent to the federal government, 26.72 per cent to states, and 20.60 per cent to local governments. To amend this aspect of our constitution will take nothing less than six months. This may be another landmine that may delay the implementation of a new minimum wage, if one is eventually agreed upon.
The NLC, going by the way it is pursuing the new minimum wage, has shown that it lacks strategic thinkers that can champion the interest of Nigerian workers. It started by proposing N500,000 as the new minimum wage for workers, only to make a turnaround that the figure was no longer realistic and that N1m should be the new minimum wage for workers in the country. That was even before the tripartite committee was set up by the federal government. With the committee in place and public hearing ongoing, the NLC, seems to have decentralized what workers in each region should earn as there have been calls for the decentralization of pay structures in the country due to several factors, chiefly among which is the cost of living in different parts of the country.
Again, the figures coming from labour leaders are unrealistic as there is no state government, and not even the federal government that can afford to pay their proposed amounts. The money is simply not there. Aside from that, it would trigger another round of hyper-inflation in the country. What has labour been able to do to for its members in about10 states whose governments are yet to pay the N30,000 minimum wage five years after it was fixed by the federal government? It is on record that Zamfara, Taraba, Benue, Kogi, Cross River, Abia and Imo States are yet to fully implement the N30,000 minimum wage. What many of the state’s Chief Executives did was to approve the payment of N30,000 minimum wage for workers on grade level one to six and consequential adjustments for those from level 7 and above.
While it is a known fact that the current N30,000 minimum wage is no longer realistic, I don’t see any of the state government or even the federal government paying anything above N100,000 as minimum wage in Nigeria for now. In actual fact, it is only the Federal Government and a handful of states like Lagos, Rivers, and maybe Delta state that will be able to pay such an amount. So, for labour to be proposing humongous amounts such as N850,000 is not only insensitive but outright foolish. What is the percentage of workers directly employed in the public sector? The entire workforce of the federal government and all its agencies is less than one million and when combined with those working at the states and local government level, they are less than 10 per cent of the entire workforce in the country. What happens to the remaining 90 percent? -those working in the private sector and majority of our workforce who are in the informal sector? Who will take care of them?
One of the primary concerns associated with a higher minimum wage is the potential to fuel inflationary pressures. While the intention behind raising the minimum wage is to improve the financial well-being of low-income workers, the resulting increase in labour costs for businesses could lead to higher prices for goods and services. This inflationary impact may offset the intended benefits of the wage increase, particularly if it outpaces the growth in workers’ purchasing power.
Again, the Nigerian economy is undergoing challenges on many fronts – inflation is already at 29.90 per cent; the debt stock is N87.9 trillion; the lending rate is 22.75 per cent; the naira is badly depreciated at N1,600 per $1, all aggravating the cost-of-living crisis. In January, food inflation accelerated to 35.41 per cent from 23.75 per cent in December 2022 and 33.93 per cent in December 2023. Petrol and diesel, the livewire of the economy, have witnessed rapid price increases. Once a new minimum wage is approved, prices of goods and services are most likely to witness another round of increase as market men and women will be waiting patiently for their own pound of flesh. Landlords and transport unions are also likely to jerk up their rents and fares respectively which would wipe out the gain recorded by labour leaders.
Although labour may harangue the federal and state governments from sacking their workers, many workers in the private sector may have to bear the brunt as most employers of labour would be forced to reduce staff strength in a bid to cope with a higher minimum wage.
What should be uppermost in the mind of labour as it is negotiating with the government is to put pressure on government to provide essential services which would bring down the cost of daily expenses. If government could provide cheaper modes of transport for their members, public transport operators will be forced to reduce their fares. If there are cheaper houses for government workers, landlords will have to think twice before increasing rents. Once there are markets where people can buy foodstuff at cheaper or controlled rate, market men and women will think twice before any arbitrary increase in price.
These are what most average workers spent their salaries on. Again, workers are spending their monies on infrastructure that the government should otherwise make available. An average worker has to provide his own water through borehole drilling, generate electricity through generating sets, security by employing local security guards or vigilantes, construct good road to his house, pay exorbitant school fees for his children’s education and so on. The actual problem is not only the money in the pocket but essentially what it can afford.
We need to restructure and rebuild the economy in a manner that will reasonably scale down the cost of living generally, and in such a way that the money workers receive at the end of the month, even if inadequate, will take them up to a point during the month while at the same time, not torpedoing the interest of those not in wage employment.
No matter the amount workers receive at the end of the month, it will not be impactful on their livelihood if the cost of living continues to experience an upward swing. Yes, Nigerian workers will have some respite from the high cost of living in the country for now, but it may not last for more than six months before inflation catches up with the gains recorded from another round of salary increase. However, what workers need is for their salaries to be able to buy more goods and services that is relevant to their good living.
See you next week.
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