Minimum Wage, Maximum Rage

Key Points:

• Minimum wage
• History of minimum wage
• The legal aspect of National minimum wage
• Reasonable wage
• Factors to consider in fixing a reasonable wage
• Effects of poor take-home pay due to low minimum wages
• Potential solutions and alternatives

By Professor Mike Ozekhome, SAN, CON, OFR

Nigerian president, Bola Ahmed Tinubu, on 18th July, 2024, in the presence of NLC president, Joe Ajaero and TUC president, Festus Osifo, approved a minimum wage of 70 thousand Naira for every Nigerian worker.

He also promised to review it every 3 years. This is coming after years of struggle by Nigerian workers, with threats of strike, warning strikes and actual strikes.

The increase comes at a time Nigerians are asphyxiating under severe hardship amid excruciatingly high cost of living driven by spiraling inflation and dire economic challenges in an inclement environment of palpable government wastes, leakages and ostentatious living.

Using a bag of rice as a metaphor, Nigerians have refused to indulge in any euphoria of jubilation as the 70 Thousand Naira will not even be able to buy a bag of rice which now sells for between 75 and 100 thousand naira per bag.

The take-home pay of every worker ought to be a matter of public interest,

They wonder how this meager enhancement of salary will positively affect the high cost of accommodation, transportation, electricity, healthcare services, living standards, etc.

The take-home pay of every worker ought to be a matter of public interest, especially to those minding the levers of power, because it is a critical issue affecting all workers, employers of labour and the entire economy.

Poor compensation or remuneration breeds inequality and affects productivity and this can serve as a catalyst for social vices such as stealing, banditry, insurgency, kidnapping, suicide, homicide, armed robbery, prostitution, human and drug trafficking, etc.

With a view to addressing poor wages and its attendant consequences, international organizations, governments and non-governmental organizations have coined terms such as “minimum wage”, “living wage” and “reasonable wage” to describe the different types of wages every worker should be entitled to.

“Wage” is the reward or compensation for labour

In this intervention, I will address these levels of wages and make a case for a “reasonable wage”; as opposed to living and the just presidentially sanctioned minimum wage of 70 Thousand Naira.

DEFINITION OF TERMS

It is common knowledge that “wage” is the reward or compensation for labour. The terms “minimum wage,” “living wage” and “reasonable wage”, all relate to compensation for labour but differ in their definitions and implications. Here’s a brief explanation of each of those terms.

MINIMUM WAGE

This is the lowest legal pay that an employer can offer employees. It is the least amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.

It is set by law and varies by country and sometimes by states or regions within a country. Sometimes, it can be arrived at by a collective agreement. From facts obtained from Wikipedia.org on the 9th July, 2024, the minimum wage in Nigeria is ₦30,000 per month which is just 24.00 USD per month?

Credit: Vanguard

By way of comparative analysis with some other countries globally, in Equatorial Guinea, the minimum wage is FCFA 129,035 (US$224) per month. In the Republic of Congo, it is FCFA 90,000 (US$170) per month in the formal sector. In Botswana, the minimum wage is P 7.34 (US$0.62) an hour for most full-time labour in the private sector; P 1,786 (US$152) per month. Rwanda RWF 56,668 (N64,602); South Africa R4,067.2 – R4,412.8 (N322,406.944 – N349,802.656); Kenya is KES15,201 (N172,683.36).

In UAE, there is no general minimum wage as it differs from profession to profession. However, for skilled Labourers AED 5,000 (N2,019,435); people with University degrees AED12,000 (N4,846,644); qualified technicians AED 7,000 (N2,827,209); South Korea is 2,010,580 Won (N2,161,574.558).

China differs from city to city. However, Shanghai is RMB 2,690 per month (N551,181) and Heilongjiang RMB 1,450 (N 297,105). Singapore does not prescribe a general minimum wage for all its workers.

The minimum wage calculated here is a weighted average based on the relative population in each province

However, the minimum Singaporean wage is averaged at 6,792SGD/Month = N7,464,408).The minimum wage in Canada is set federally and by each province and territory; ranges from CA$13 to CA$16 (US$9.69 to US$11.93) per hour.This article offers free shipping on qualified Face mask products, or buy online and pick up in store today at Medical Department

The minimum wage calculated here is a weighted average based on the relative population in each province. In Australia, most workers are covered by an award, which may vary by employee age, geographical location and industry.

Workers receive mandatory employer loadings such as penalty rates or leave loading. Minimum wages are set federally by the Fair Work Commission. For those 21 and older, not covered by an award or other instrument, (as of July 1, 2023) – the minimum wage is $A 882.80 (US$600) per week, or $A 23.23 (US$15) per hour Casual workers are paid a loading of typically 25%, resulting in a minimum of A$28 (US$18) per hour for those workers.

Workers under 21, apprentices and trainees not covered by an award, have a minimum wages set at a percentage of the ordinary rate. For those under 16, this is 36.8% or A$7.87 (US$5.25) per hour; $A 9.83 (US$6.56) with the casual loading. In France, it is €1,709.28 (US$2022) gross per month, €11.27(US$12.5) per hour. 12.41 per hour is the minimum wage in Germany, a higher minimum wage is often set by collective bargaining agreements and enforceable by law.

Workers under 21, apprentices and trainees not covered by an award, have a minimum wages set at a percentage of the ordinary rate

In Ghana, it is ₵18.19 (US$1.2) per day. In Morocco, it is MAD 3,500 (US$349) per month in public sector, MAD 3,111 (US$310) per month in private sector, 84.37 Dh, (US$8.42) per day for agricultural workers. In Palestine, it is 1,880 ILS (US$582) per month. In the United States of America, the Federal nationwide minimum wage in the United States is US$7.25 per hour.

States may also set a minimum, in which case the higher of the two is controlling; some territories are exempt and have lower rates. As of January 3, 2022, effective state minimum wage rates range from US$7.25 to US$15.00 per hour, with an average of about $12.00 across all minimum wage workers as of 2019. Local government minimum wages exist as well, the highest of which reach to $17.13 per hour.

States may also set a minimum

The minimum wage in the United Kingdom is: £11.44 stg (US$15.67) per hour for those aged 21+ £8.60 (US$11.78) per hour for those aged 18–20£6.40 (US$8.77) per hour for those aged 16-17, apprentices aged 16 to 18, and those aged 19 or over who are in their first year of apprenticeship.

Employees under the age of 16 are not entitled to the National Minimum Wage. It is important to note that the term “minimum wage” does not mean minuteness or paltriness.

The goal of the minimum wage is to ensure a basic standard of living for workers. However, the extant #30,000.00 (Thirty Thousand Naira) minimum wage in Nigeria cannot guarantee a basic standard of living. With this wage, it will take a worker three months to earn enough to buy a mere bag of rice.

In January 2024, the Federal government had inaugurated a 37-member tripartite committee to review the National Minimum Wage.

Employees under the age of 16 are not entitled to the National Minimum Wage.

The Nigeria Labour Congress (NLC) had insisted on a minimum wage of #250,000.00 (Two Hundred and Fifty Thousand Naira) given the uncontrollable inflation in the country and the value of the ever-depreciating naira against the dollar in an economy that is fast being dollarised.

A BRIEF HISTORY OF MINIMUM WAGE IN NIGERIA

Let us recall that the late Premier of Western Region, the late sage, Chief Obafemi Awolowo, had successfully implemented the first minimum wage policy in Nigeria. From October 1954, the minimum wage paid by Awolowo to Westerners actually doubled that paid to workers of the same level in other parts of Nigeria.

Western Region government paid 5 shillings and six pence minimum wage to workers at a time that workers in the North were paid only two shillings and eight pence. He had wanted to implement a national minimum wage. He had indeed made it one of the cardinal agenda of his administration if elected as Prime Minister of Nigeria, an ambition that never came to pass.

Chief Awolowo had lost in the 1959 elections to Sir Abubakar Tafawa Balewa, KBE, PC, Nigeria’s first and only Prime Minister. The Prime Minister however failed to do anything about a national minimum wage law to help Nigerian workers.

Credit: Punch

The late President Shehu Shagari it was who eventually signed the first national minimum wage legislation into law in September, 1981. The Nigerian Labour Congress, under the leadership of the late Hassan Sunmonu, had trenchantly advocated for this bill.

All full-time employees were protected by this new rule, with the exception of seasonal workers and those employed by businesses with less than 50 employees. The monthly salary was 125 naira. This wage at that time approximated to US$204 at the 1981 exchange rate of US$1 = 0.61 naira.

The late President Shehu Shagari it was who eventually signed the first national minimum wage

Based on the current currency rate of approximately US$1 = #1,530 naira, the amount paid to Nigerians as minimum wage in 1981 would be equivalent to nearly 312, 120 naira at the 2024 rate. The new enhanced minimum wage in the country is still a mere #70, 000.00 (about US$ 46) per month, less than 15% of the salary earned by the average Nigerian 43 years ago!

This means that the quality of lives of Nigerians have actually depreciated, rather than being enhanced. This is the grouse of not just the organized labour, but of average Nigerian worker.

THE LEGAL ASPECTS OF A NATIONAL MINIMUM WAGE

Fixing the national minimum wage is a constitutional issue given the provisions of Part 1, item 34 of the (Exclusive Legislative List) Constitution of the Federal Republic of Nigeria, 1999 (as amended). By virtue of the provisions of item 34 cited above, the National Assembly can, via legislation, prescribe a minimum wage for the federation or any part thereof.

What it prescribes is binding on everyone, including the Federal, States and Local governments in Nigeria.

LIVING WAGE: This is an estimate of the amount of money needed for a worker to meet their basic needs, which include food, housing, water, education and other essential expenses, while also allowing for some discretionary income.

Unlike the minimum wage, the living wage is not legally mandated but is often used as a benchmark for fair wages.

It is an income that allows an individual or family to also afford adequate shelter, clothing, childcare, healthcare, transportation and other basic needs such as personal care items, savings for unexpected events etc. It is that wage that is higher than the minimum wage.

Unlike the minimum wage, the living wage is not legally mandated but is often used as a benchmark for fair wages. It aims to provide a standard of living above the poverty line and it is calculated based on cost of living and basic needs.

Given that the cost of living is already killing the living in Nigeria, the government and the organized labour should look at a living wage.

REASONABLE WAGE

A reasonable wage is one that fairly compensates an individual for his or her work, covering basic living expenses and ensuring a decent standard of living. The concept of a reasonable wage can vary depending on factors such as location, industry, job role, and cost of living.

Here are some key aspects to consider when determining what might constitute a reasonable wage:

FACTORS TO CONSIDER IN FIXING A REASONABLE WAGE

Living Wage:

This is the minimum income necessary for a worker to meet his or her basic needs, including housing, food, healthcare, and other essentials. A living wage is often higher than the minimum wage and is adjusted for the cost of living in different areas.

Market Rate: Wages should be competitive with what other employers in the same industry and region are paying for similar work. This helps attract and retain talent.Skill Level and Experience: Employees with higher levels of skill, education, and experience typically command higher wages.

The state of the economy can influence wage levels.

Job Responsibilities: The complexity and responsibility of the job should be reflected in the wage. More demanding or critical roles should be compensated accordingly.

Economic Conditions: The state of the economy can influence wage levels. During times of economic growth, wages may rise, while during downturns, wage growth might slow or stagnate.Legal Requirements: Wages must comply with federal labour laws, including minimum wage regulations.

Company’s Financial Health: The ability of a company to pay its employees is also a factor. Financially stable companies are more likely to offer higher wages.Benefits and Perks: Non-wage benefits such as health insurance, retirement plans, paid time off, and other perks contribute to the overall compensation package.

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A reasonable wage is a balance between these factors, ensuring that employees can live comfortably while employers remain competitive and financially sustainable.

THE EFFECTS OF POOR TAKE-HOME PAY DUE TO LOW MINIMUM WAGES

THE ECONOMIC IMPACT

Any wage that cannot meet basic standard of living is nothing but exploitation and should be condemned by all. Workers earning minimum wage often struggle to meet basic needs, such as housing, food, healthcare, and education, which can perpetuate the cycle of poverty.

Low minimum wages contribute to widening income inequality, as the gap between the highest and lowest earners increases. Experience has shown that workers with higher disposable incomes are likely to spend more on goods and services, stimulating demand and economic growth. Conversely, low take-home pay can lead to decreased consumer spending, slowing economic growth.

THE SOCIAL IMPACT

The social impact of law minimum wage is more worrisome than the economic impact. Financial stress from low wages can lead to poor mental and physical health outcomes, including increased rates of depression, anxiety, suicide, and chronic illnesses. Also, inadequate income can result in poor living conditions, limited access to nutritious food, and insufficient healthcare.

Low-income families may struggle to afford educational opportunities for their children, limiting social mobility and perpetuating cycles of poverty. Higher minimum wages can provide families with the resources needed to invest in their children’s education and future.

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LABOUR MARKET IMPACT

Low wages can lead to high employee turnover, as workers seek better-paying opportunities. This can increase costs for employers due to recruiting and training new employees. Fair wages can improve employee morale and productivity, as workers feel more valued and motivated.

Higher minimum wages can attract more individuals into the labour force

Higher minimum wages can attract more individuals into the labour force, increasing labour market participation rates. While, low wages may discourage people from entering or remaining in the workforce, particularly if the costs of working (e.g., transportation, childcare) outweigh the benefits.

GOVERNMENT AND POLICY IMPACT

Low-wage workers often rely on government assistance programs, such housing subsidies, to make ends meet. Thus, raising the minimum wage can reduce the burden on these programs and potentially lower government spending.

The minimum wage is a contentious issue in political debates, with arguments about the balance between fair pay and potential negative effects on employment. Recently, the Federal Government of Nigeria said it can pay what it can afford, even as some of the states have distanced themselves from the benchmark of #60,000 (Sixty Thousand Naira).

My advice is that policymakers and organized labour should also consider the impact on small businesses, employment rates, and overall economic health when determining minimum wage levels. Also, there should be a periodic review of minimum wage to reflect the economic reality of the times.

POTENTIAL SOLUTIONS AND ALTERNATIVES

As noted earlier, the extant minimum wage is Nigeria cannot sustain any good standard of living. There should therefore be a gradual increase or a periodic review of the minimum wage to reflect the economic realities. Also, adjusting the minimum wage based on the cost of living in different States can ensure that wages are more appropriate for local economic conditions.

People who work in urban areas should be compensated more than people who work in rural areas.

People who work in urban areas should be compensated more than people who work in rural areas. Wage review should take into consideration, the cost of housing, transportation, food, etc.Combining minimum wage increases with other supportive measures, such as tax credits and job training programs, can provide a more comprehensive approach to improving the livelihoods of low-wage workers.

CONCLUSION

Addressing the issue of poor take-home pay through minimum wage policies requires a nuanced approach that considers the economic, social, and labour market impacts, as well as potential policy solutions to support both workers and employers. It is doubtful if the Tinubu government calmly took these into consideration.

A situation where workers can neither fend for themselves, nor their families is deplorable and must be avoided. It can lead to chaos, anarchy and uncontrollable social unrest. The festering crisis in Kenya which has led to citizens literally baying for the blood of a once-upon-a-time populist William Ruto is an eye opener to any sensible and reasonable government.

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Granted that president Tinubu has obviously shown some concern and sensitivity to the plight of Nigerian workers by this new enhanced minimum wage, I dare say it has not done much to ameliorate the quagmire Nigeria is currently meshed in.

Not to accept this reality and play the proverbial ostrich is unhelpful. Time is not on government’s side to take more drastic steps to stem the corrosive hunger, anger and mass disenchantment currently ravaging Nigeria. For now, it is a case of minimum wage, maximum rage.