Beyond the minimum wage hike 

The federal government inauspiciously missed the May 1 deadline for announcing a new minimum wage. The delay has worsened the tension in the economy.

Apparently worried about what government would announce as the next minimum wage, state governors are brainstorming on the affordability and sustainability of the expected hike in minimum wage.

The issue of minimum wage dominated the virtual meeting of the Nigeria Governors’ Forum last week. The governors are worried about how they would pay the new minimum wage which from all indications may be deep into six digits. 

Even as the federal government is yet to make an official pronouncement, speculations are rife that government might offer anything from N150,000 to N200,000 as new minimum wage. As usual, labour is still grand-standing over demands for N615,000 as new minimum wage. 

Ironically, labour has finally put its house in order. The Trade Union Congress (TUC) has buried the hatchet and agreed on a single figure with the Nigeria Labour Congress (NLC).

From all indications, government and labour are far apart on their demands and offers as regards the new minimum wage. While labour wants N615,000 as a living wage, government is bent on giving workers a minimum wage that governors of impoverished states could pay and sustain.

Ironically, Edo state appears to have pre-empted the minimum wage negotiators assembled by the federal government. The state government has slammed its workers with a minimum wage of N70,000 in a seeming “take-it-or-leave-it Greek gift. Whatever eventually emerges as new minimum wage for Nigerian workers, one thing that pundits do not want is a unified minimum wage for the country.

During the negotiation process each of the six geo-political zones submitted different figures as zonal demand. The South-west zone submitted the highest figure.

Even the negotiators expect the new minimum wage to reflect the disparity in economic strength of the different zones. Sokoto is known as Nigeria’s poorest state. 

The state musters the highest number of poor people in Nigeria. It would be abnormal for anyone to expect Sokoto state to pay the same minimum wage as Lagos which is now ranked as Africa’s seventh largest economy.

The minimum wage signed into law in 2015 slammed a uniform figure on the entire country despite the diversified economic strength of the states. Pundits expect that anomaly to be corrected in the new minimum wage. 

In the United States of America (USA), the state of Mississippi, the poorest state in the union, pays a considerably lower minimum wage than super-rich California which harbors Hollywood and most of the high tech electronic firms. 

Nigeria should borrow a leaf from that leading example and allow Sokoto and the likes to pay a minimum wage dictated by their pockets.

The sad thing about minimum wage in Nigeria is that some states defiantly refused to pay the N30,000 minimum wage. Kogi state never paid full salary to its workers in the last 16 years. 

The state civil servants jubilated last week as the new governor paid full salaries for the first time in 16 years. Even super-rich Lagos state employs hundreds of workers who are paid a scant N15,000 monthly.

A uniform minimum wage would impose the Kogi state experience on many other states as they may not be able to pay the same minimum wage as states with higher revenue.

The figures speculated as possible new minimum wage flaunted by the federal government has scared some state governors even as the labour unions believe that such offer borders on starving wages.

Outrageous minimum wage in the face of low productivity cannot give workers the luxury life expected by labour leaders. Any minimum wage that does not factor in the low productivity in the economy, especially the civil service, would simply be depleted by inflation while workers return to starving level.

Minimum wage is loaded with its own inflationary potential. Employers would mark up prices of goods and services to be able to pay the new minimum wage. The price hikes, and consequently inflation rate, would be commensurate with the level of increase attained in the new minimum wage.

The six digit minimum wage to be announced by the federal government is a dangerous invitation to hyper inflation. The level of price hikes by manufacturers and service providers that would sustain the new minimum wage will push inflation to alarming proportions.

Besides the expected price hikes by manufacturers and service providers, retailers are waiting on the wings to take a pound of flesh from workers’ new minimum wage. They would mark up prices to place them at par with paid workers’ new income.

I believe that the three tiers of government in the federation should be more concerned with taming inflation than giving workers a living minimum wage that the economy cannot sustain.

If government had kept inflation at the 11 per cent level it was when the current minimum wage was signed into law in 2015, we would not be talking of the jumbo hikes in minimum wage being advocated by labour unions.  

If inflation rate was as moderate as it was in 2015, we would be talking of grudgingly pushing minimum wage to N40,000 or less. That would not have created the enormous tension the economy is going through at the moment.

Government must endeavour to avoid the massive depreciation of the naira experienced in the last eight months which partially engendered the current food inflation rate of 40 per cent.

That means that the war on corruption must be renewed. Speculative biddings fueled by corruption pushed the naira to its shameful exchange rate of N1,862 in February. That must be halted. Besides, the insecurity that keeps farmers from the field must be tackled.

Government must clip the wings of profiteering retailers and end arbitrary price hikes. It is easier to keep inflation at bay than allow it to run riots only for government to offer workers a minimum wage that the economy’s production level cannot sustain.