Nigeria’s minimum wage conundrum

Minimum wage

FEW were surprised when the ongoing talks on the national minimum wage broke down on May 15. The Nigeria Labour Congress and the Trade Union Congress staged a walkout after rejecting the N48,000 per month offered by the Federal Government, as opposed to the N615,000 per month proposed by organised labour. The organised private sector proposed N54,000 per month. As the parties return to the negotiations on Tuesday, common sense should prevail to avoid a protracted exercise.

By NLC’s calculations, it arrived at the N615,000 figure based on living expenses for a family of six as feeding (N270,000), housing (N40,000), electricity (N20,000),utility/water (N10,000), kerosene/cooking gas (N25,000 to N35,000), clothing (N20,000), education (N50,000), medical (N50,000), transportation (N110,000), and sanitation (N10,000). In naira terms, this is a lot of money. It is not realistic. Public and private sector employers might be unable to foot this bill as other overhead costs are abnormally high.

Historically, the minimum wage was fixed at N125 per month at the Central Bank of Nigeria’s official exchange rate of N0.61/$ or $76.25 in 1981. It was reviewed in 1991 to 250 (N8.04/$), N5,500 in 2000 (N85.98/$), N18,900 in 2011 (N165.1/$) and N30,000 in 2019 (N305/$). The current naira exchange rate is N1,522/$. The proposed N48,000 amounts to $31.5. Inflation is galloping at 33.69 per cent in April. In effect, real wages have collapsed since 1981.

The International Labour Organisation guidelines on minimum wage calculations suggest the principle of full consultation be applied with the government ensuring exhaustive negotiation and participation with social partners based on equality.

The United Kingdom has tied the national minimum wage to inflation and expansion or contraction of the economy and wages have risen constantly over the last three years to £11.44 per hour.

It also applies to almost all categories of workers including agricultural workers, casual labourers, foreign workers and apprentices whether engaged full-time or part-time. The minimum wage is $16 per hour in California and New York states in the United States.

The National Minimum Wage Act 2019 only covers 12 per cent of workers, mostly in the public sector, compared with 60 per cent in South Africa. It excludes part-time workers, those employed by organisations with less than 25 persons, maritime and aviation workers governed by industry rules, and agricultural workers. The NLC should be pushing to include all categories of workers for coverage under subsequent acts to ensure fairness for all.

However, the current negotiations reflect a wide disparity. While the offer from the government appears condescending, where will it raise N615,000? State governors intimidated ex-President Goodluck Jonathan to liquidate the Excess Crude Account to fund the new N18,900 minimum wage in 2011.

In 2019, Muhammadu Buhari’s government borrowed heavily to pay N30,000. Many states could not even pay and workers were owed for months. So, labour leaders and employers should work assiduously to narrow their positions to avert another round of industrial crises.

Regardless, the government must provide social services such as healthcare, education, transportation, housing, water and sanitation outlined by the NLC at reasonable rates because the cost of living is astronomical. The current minimum wage regime fails to address growing multi-dimensional poverty among the working class. So, the government must do something reasonable.

Organised labour needs to step up the challenge to the government to address issues around food security, investments in agriculture, and support for industries and SMEs to create jobs and a more stable economy.

It needs to work with the government to create sustainable frameworks for upskilling workers in IT and other skills to ensure workers remain relevant, retain earning power, and maintain good living standards. It is about good economics because spiralling inflation and continuous erosion of the naira value will make nonsense of any wage award now or in the future.