Labour force pay and productivity: Rethinking wage increase in Nigeria

In one of my articles in year 2005 on incessant industrial actions in Nigeria, I argued that labour’s resort to industrial action over demand for wage increase is a misplaced priority. My argument then, was, instead of embarking on “strike” over wage increase, Labour should at all times, demand for accountability and transparency from the government on how and for what purposes public funds are spent. Before I proceed to discuss the subject of this article, permit me to state that all previous wage increase in Nigeria left the workers more impoverished.

While it is agreeable that Nigerians are hardworking people, it is important to determine how productive the hard work is. Every effort put into an activity that produces nothing is futile. It is therefore based on this background that many have questioned the productivity of the Nigeria’s labour force. This is even more questionable when more than 70% of our annual budget (in form of wages and salaries, overhead and other recurrent costs) is utilized to service the labour force which is estimated at only about 29% of the Country’s population. Painfully, more than 60% of the less than 30% budgeted for capital costs end up wasted as a result of both inefficiencies and corruption by the same 29% labour force. The implication of this is that more than 88% of Nigeria’s annual budget is utilized (wasted) by 29% of the total population (including political appointees).

According to the National Bureau of Statistics short analysis on labour productivity in Nigeria (2010 -2014), Nigeria’s Labour productivity figure ranked very low when compared to other emerging countries. Nigeria’s labour productivity was US$3.77 in 2014 compared to an average of USD$20.65 for some selected emerging economies (Turkey- US$28.9, Russia –US$24, Brazil –US$10.7 and Mexico –US$19.0). Nigeria has over the years failed to adequately compensate for large numbers engaged in work when viewed from the lens of labour productivity index and sizes of Nigerian GDP. Nigeria’s labour productivity is three times smaller than the average for countries whose economies are of similar size to Nigeria.

Over the years, Nigeria’s wage increase has been on the basis of political exigency and pressures from the labour union and not on the basis of productivity. Worst still, nobody pays attention to the real implications of such political announcement on the overall national and sub-national economy, including the ability to pay problem. Promotion in public/civil service is primarily based on number of years you have spent in an establishment and your “connection to/with the government in power” and has no link to performance. How do you expect a worker to be productive when his wage is not tied to performance/productivity? No wonder you find mini shops operated by workers of establishments inside their respective offices.

More worrisome is the trending revelations over unmerited wages heads of government agencies pay themselves. How can a public servant take home an unearned salary of N78m/annum? In most cases, in addition to such humongous salary, government still takes care of their fuelling and other personal expenses. The resultant implications are traceable to the continuing government annual budget deficit, debt accumulation and lack/inadequate infrastructure. If it were to be in other countries, citizens would have been on the streets demonstrating over the pillage of the national resources by the selected few. Ethnicity and religion differences make it easier for “rogues” to continue in their looting and sharing of our common resources.

Nigeria’s quest to becoming the largest economy in 2020 (if we are indeed truly sincere to ourselves on this vision) is attainable if we optimally utilise our labour force. Our capacity to improve national growth largely depends on our labour force as it propels productivity and increases output. Currently, Nigeria’s working age population is about 53.88% of the total population and the largest available workforce in Africa. Unfortunately, this workforce population is underutilised and unutilised with high level of redundancy and dependency ratio.

With Nigeria’s market size ranked 25th in world by World Economic Forum’s Competitiveness 2015-2016 report, coupled with the huge available workforce, Nigerian government needs to focus on improving the skills and employability of high dependent workforce.  Almost half of Nigeria’s output is driven by low skilled employment and underemployment with more than 84% of Nigeria’s labour force population suffering significant skills deficiency. In addition, only about 11% of Nigeria’s workforce population has post-secondary education. Unfortunately, government’s investment in social sector is constantly declining. No real action based attention has been given to the education sector in terms of quality and availability by the government. Claimed investments in power and infrastructure yield no benefits with allegations of monies appropriated for these sectors ending up in bank accounts of either government officials or their cronies. Following the gaps identifies above, we have continued to grapple with an increasing mismatch in labour skills and labour market requirements, leading to excess supply of labour with its attendant effects as low wage and low skilled subsistence jobs.

Nigeria has the potential of becoming the next world’s production hub after China given our huge cheap work force population and big market size. Nigeria must therefore invest heavily on human capital and infrastructure development in order to create the right and conducive business environment. Nigeria labour union’s priority should therefore be to make the government put the necessary infrastructure (physical, human, financial and IT) in place to attract real investors either through dialogue or industrial actions.

Making Nigeria and investment destination would ultimately led to higher demand for labour force which would in turn lead to higher wage. This assumption holds when the demand for labour becomes higher than the supply of labour. On the other hand, government should as a policy, determine wage increase on the basis of productivity and performance and not as a political tool.

Chiwuike Uba