Owei Lakemfa

November 24, 2010

Economics of the minimum wage

By Owei Lakemfa
NIGERIANS are not a complex people, but we have a few  who would want to ride the rest of us like donkeys. Whenever we seem to be making a headway, these manipulators throw spanner into the works. They usually do this from dark alleys so that their identity will be concealed.

This is the case with the new minimum wage. All Nigerians I know or have read about, agree that wages are so low that a higher minimum wage is long overdue. Given this reality, the logical step was how do we as a people arrive at a new wage that would to some extent, address the needs of the lowest and poorest, as well as the ability of states and small scale employers, who are the most vulnerable employers, to pay.

We resorted to the universal and most representative way of doing this by  setting up a tripartite negotiating committee where all stakeholders would meet, discuss, negotiate and jointly arrive at a consensus which should reflect our realities.

Each segment of the stakeholders were allowed to do their own independent research, provide the basis for whatever minimum wage figure they propose and use it as a basis of negotiation with other segments before a general consensus was arrived at. Significantly, all parties saw the process as a patriotic assignment that should not be sacrificed for selfish interests.

The Nigeria Labour Congress(NLC) made a submission for a N52,200 minimum wage, which at first glance may appear quite high, but the breakdown makes it quite reasonable.

Basing its submission on  a family of six; the worker, spouse and four children policy, the Congress estimated that the family would need a minimum of N500 monthly for water,N1,000  for electricity bills and  N1,000 monthly for “entertainment, recreation and communication”.

It assumed that the family of six would need N5, 000 for medical expenses monthly and N1,300 for cleaners, soaps and detergent. Its highest estimate is N20,000 for food; its argument is that a family of six would need about N700 daily for feeding; this comes to N39 per meal.

On the other hand, the Trade Union Congress(TUC) proposed N30,000 which brought the average  estimate of labour to N41,100.

The proposals of the state governments varied from the N10,000 by Plateau and Ebonyi states to the N46,700  by Abia State. Anambra State and the FCT proposed N25, 000, while Kwara, Imo and  and Kebbi states proposed N30,000. The 13 states that made written submissions proposed an average of N21,800.

Additionally, the state governments were represented throughout the negotiations by Mr Chris Ugwu, the Enugu State Head of Service, Mr Obel Yaji of the Gombe State Cabinet Office and  Jide Sanwo-Olu, Commissioner for Establishment, Training and Pension, Lagos State.

The Federal Government appointed  the chairman, Justice S.M. Alfa Belgore, retired Chief Justice of the Federation, while its agencies like  the National Planning Commission, National Productivity Centre, National Bureau of Statistics and   the Central Bank  proposed an average N22,500 new minimum wage.

In fact, the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) which is constitutionally charged with mobilising all the monies that go into the Federation accounts, and determines the salaries of political officers in the country, proposed N34,200 as the new minimum wage.

On the other hand, the Nigerian Institute  of Social and Economic Research (NISER), the Federal Government arm responsible for broad based research, proposed N41, 000.

The employers were represented by the Nigeria Employers Consultative Association (NECA), the Manufacturers Association of Nigeria(MAN), the Nigeria Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigeria Association of Small and Medium Enterprises (NASME).  The Small and Medium Enterprises is the weakest in the employer chain, but its members proposed on the  average N20,586.67 as the new minimum wage.

Excluding Labour that demanded N41,100, when the average proposal of   the state governments, experts, including federal agencies and the Small and Medium Enterprises was taken, it came to N21,628.67. But rather than accept this,  members pressured labour to accept the  lower figure of N18,000.

What was left was for the Federal Government to send the bill attached by the Committee to the National Assembly (NASS) to pass into law. In 1981, after such consensus by all stake holders, the  Assembly wasted no time passing it. Also in 2000, the NASS within one day passed the endorsed minimum wage consensus.

There is every likelihood that this will be done in this case, especially after the House of Representatives in support of higher wages had passed for Second Reading, a bill for  N30,000 as the new minimum wage in the country.

The leadership of the National Assembly has not hidden its support and readiness to pass the bill once it is sent to the NASS.

But there  are hidden forces operating from some states that are bent on frustrating the populace, engendering industrial crisis and punishing the poor and vulnerable. Such forces claim that as a federation, the N18,000 National Minimum Wage cannot be imposed on states.

But this argument is spurious. First, Labour is on the Exclusive List in the Constitution; secondly, the states participated actively in the negotiations; thirdly, the salaries of elective office holders, including state governors are fixed by the RMAFC, not the states, so why should that of poor workers be different?

There is also talk about public hearing obviously as a delay tactic.

The essence of public hearing is to give stakeholders the opportunity to make inputs   before a law is passed; in this case, all stakeholders negotiated for one year before reaching a consensus which is what  is to be forwarded to the NASS.

In any case, what public hearing was held before political office holders increased their salaries and allowances by over 800 per cent? Public hearing is a vehicle for democratisation, not an instrument to obstruct social justice or deny the populace a minimum standard of living.

Show me  a state governor  that thinks N18,000 monthly is  too high a salary for a family of six, and I will point out a man that does not deserve to be in office.