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  • Sunday, June 16, 2024
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BusinessDay

Labour’s wage demand to cost FG over N11trn yearly

The federal government’s wage bill will almost double at the very least if the organised labour doubles down on the push for a 20-fold increase in the minimum wage.

With the proposed minimum wage of N615,000, the government’s personnel costs for 1.5 million workers will rise from about N7 trillion which it currently stands to N11 trillion.

Ben Akabueze, the director general of the budget office of the federation, had said the government’s personnel cost was over N5 trillion, with 1.5 million workers under the federal government’s payroll.

The Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) are demanding that the country’s minimum wage be increased by 1,950 percent from N30,000 to N615,000.

The Union says it arrived at the minimum wage recommendation after painstakingly computing the monthly cost of living of Nigerian workers, with food, transportation taking a chunk of the expenses.

Read also: FG is yet to call us for new minimum wage – TUC president

According to a “cost of living estimate” released by the NLC, it will cost a Nigerian worker N9,000 to feed for 30 days, amounting to N270,000.

Each worker is also projected to spend at least N110,000 on transportation in a month.

Meanwhile, the federal government has proposed N48,000, leading to a battle royale between the organised labour and the government.

It is not however clear if the government is prepared to shift grounds, as the labour unions have continued to insist on N615,000 minimum wage, giving states who are yet to implement the N30,000 wage two weeks ultimatum.

Many analysts as well as other stakeholders have noted that while the pay increment is necessary given the high cost of food, accommodation, energy and other basic needs, the proposed wage by NLC/TUC may not be feasible.

As it stands, the federal government may need to raise a supplementary budget to accommodate any wage review, a recent report by the International Monetary Fund shows.

The IMF noted in its latest country staff report for Nigeria that the negotiated amount may surpass the budgeted amount in the original 2024 budget.

Olu Fasan, an author and social commentator in a column published by BusinessDay, argued that in many countries, the focus has shifted from the minimum wage to the living wage.

Read also: Does an increase in the minimum wage automatically guarantee a better life?

He maintained that minimum wage impoverishes workers and entrench a phenomenon known as in-work poverty, where people are in paid jobs but still can’t make ends meet. He advocated for a living wage as it is the only “antidote” to poverty.

On the proposal of the organised labour, Fasan noted that the demand is not feasible but proposed N100-120,000 as a decent minimum wage.

“Of course, the N615,000 per month that the labour unions demand is unreasonable. However, given that the government provides no basic amenities for the people and considering the limited coverage of any living wage, it’s hard to disagree with something within the range of N100,000–N120,000 per month,” he said.

Nigeria’s minimum wage lowest among selected countries

Nigerian workers are paid a pittance relative to what their peers in Mexico, Indonesia and Turkey get as their minimum wage.

Read also: Nigeria’s minimum wage, lowest among 7 selected African countries

At the end of every 26 working days, a low income earner in Turkey earns $578, 25 times more than what a Nigerian receives. Workers in Mexico and Indonesia earn $369.5 and $316 respectively.

Turkey is able to pay such an amount because its government revenue to GDP ratio outstrips that of Nigeria, which means the Turkish government is richer than Nigeria.

According to data from the International Monetary Fund (IMF), Turkey’s revenue as a percentage of GDP stood at 26.41 percent in 2022, Mexico’s was 24.2 percent but Nigeria’s pales at 8.79 percent, which explains the low wages in Africa’s most populous nation.

In Africa, Nigeria’s minimum wage still cannot match what a South African worker earns nor what a low income earner gets in Egypt.

The lowest a worker can earn in South Africa is $242, over 10 times higher that what is earned in Nigeria. The country’s government gets 27.75 percent as a share of its GDP compared to the low revenue generated in Nigeria.

Read also: Debunking Economic Myths: Fiscal austerity measures aren’t always the solution for economic growth

Adeola Adenikinju, the president of Nigerian Economic Society, said getting a wage review requires that both the government and labour unions map out certain objective criteria.

The professor of Economics said that in arriving at a minimum wage, one of the criteria to look out for is the cost of living and the level of inflation in the country.

Additionally, he said the level of productivity of the nation is another factor that must be considered in a wage review.

He maintained that another factor in arriving at a new minimum wage is affordability. Adenikinju argued that even with the rise to N30,000 in 2018, some state governments still cannot afford to pay.

“There should be some metrics used in arriving at a new minimum wage. You need some objective criteria that must be summed up to 100%. By how much has inflation, productivity and government budget risen to make up a new minimum wage,” NES president said.

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