May Day 2019 ushers in the joyful news of an increased minimum wage for the Nigerian worker and hopes for better conditions of service. As the workers march out, however, significant concern still exists about the implementation of the new salaries particularly at the level of the states. States still owe their workers for many months, with a notorious case of outstanding wages of 38 months in Kogi State.
Officials at Federal, State and Local Government levels owe the Nigerian worker the responsibility of ensuring full compliance with payment of the new agreed minimum wage. It is the minimum duty and one that they can discharge with diligent application to their duties and oath of office.
May Day 2019 should be cause for rejoicing but also a reflection for the labour movement in the country and employers in both the public and private sectors. Both parties need to think about managing the new wage structure, agreeing on a framework for future reviews to avoid it becoming a recurring source of conflict and ensuring industrial harmony.
Congratulations to the Nigerian Labour Congress and affiliated unions as well as to the Trade Union Congress and its affiliates for securing through the legislature and executive affirmation an upward review of remuneration for Nigerian workers. The Minimum Wage Repeal and Re-Enactment Act 2019 mandated an upward adjustment of wages after eleven A rise from N18000 to N30 000 ordinarily represents a significant 67 percent increase. Due to the time it has taken between the old and the new minima, however, the increment suffers from the effect of inflation. Even so, it would translate to higher income for all levels of workers.
There are compelling concerns about the new minimum wage. There is the possibility of wage-push inflation because the new salary would put pressure on employers who would in turn increase prices and thus lead to an overall rise in the cost of goods and services. Employers in the private sector may be forced to accommodate wage increases in consequence of the public sector one.
Analysts have already tried to pour cold water on the increment based on purchasing power. With the cost of fuel as a base, the analysis shows that the previous minimum wage of N18000 fetched 206.89 litres of fuel atN87 per litre. Fuel now sells for N145 per litre while minimum wage at N30000 would bring the same quantity of petroleum.On the positive side of this sum is the fact that the new figure at least ensures the worker does not lose out due to inflation. He maintains his capacity to meet basic needs. Similarly, comparisons of the exchange value of the minimum wage versus the dollar show the new wage fetches lower than the old one.
Existing structural challenges would limit the impact of the new wage. For one, analysis by BudgIT shows that only 18 out of the 36 states are in a strong position to carry the load from their federation account allocations and internally generated revenue. There may thus be issues with compliance by state governments. Labour is already drawing attention to this possibility and threatening showdowns.
The increment comes against the backdrop of weak fiscal revenues and declining consumer purchasing power. The private sector will struggle with demands for similar action. The labour market is slack, and unions in the private sector would be cautious in making demands.
Data from the National Bureau of Statistics show that unemployment increased to 23.1% in the third quarter of 2018. Operating surplus in the economy similarly weakened. All of this coupled with the fact that productivity has not kept pace.
Per unit labour productivity, an index of the real output of the employed population per hour) recorded a marginal growth of 1.2 percent between 2011 and 2016. For the Federal and State governments, a higher wage bill may translate to deepening the unfortunate situation of higher expenditure on recurrent rather than capital spending. It would mean less money available for the infrastructure and high impact projects Nigeria needs to jumpstart the economy.
Prudent management is the call on the governments. Private sector employers would have to juggle their balls to ensure a balance between positive response to the imperative of wage review and maintaining price stability as well as employment levels. Then there is the call for higher productivity of the workforce, particularly in the public sector.
All parties must work on ensuring that the joy of the wage increment does not translate to a May Day call.