• Wednesday, July 24, 2024
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Living vs minimum wage: Labour’s fresh push for salary increase

Living vs minimum wage: Labour’s fresh push for salary increase

The ongoing battle between organised labour and the Federal Government of Nigeria over the right minimum wage, also known as “a living wage,” for public sector workers has intensified over the past few days.

Experts say the minimum wage negotiation is the most contentious in the history of minimum wage negotiation in Nigeria, exacerbated by the economic reforms.

According to the International Labour Organisation, the minimum wage is the minimum amount of remuneration an employer is required to pay for the work performed during a given period.

Unlike a living wage, which is a more standard and satisfactory payment, the minimum wage serves as a baseline that ensures the worker can meet their essential needs.

Read also:Inflation and debt … Aftermath of the last minimum wage increment

In April, organised labour, comprising the Nigerian Labour Congress and Trade Union Congress, demanded N615,000 as the new monthly minimum wage for workers, an increase of 1,950 percent from N30,000.

The N615,000, which was seen as unrealistic, was reduced to N497,000 and further to N494,000. However, the government only raised its minimum wage offer from N57,000 to N60,000.

Adewale-Smatt Oyerinde, director-general of the Nigeria Employers’ Consultative Association and one of the spokespersons for the organised private sector of Nigeria, said in a recent statement that the offer of N60,000, which is a 100 percent increase in the current national minimum wage, was sacrificial on the part of the organised private sector.

“Unlike a living wage, which is a more standard and satisfactory payment, the minimum wage serves as a baseline that ensures the worker can meet their essential needs.”

“The demand for organised labour during this period has the potential to cripple small and medium enterprises and push many other businesses into comatoseness,” he said.

After several hours of meetings last Friday, the federal government and the organised private sector increased their offer to N62,000. However, organised labour is proposing N250,000, a reduction of 49.4 percent from N494,000.

Going by organised labour’s proposed wage, BusinessDay estimates from the 36 states’ 2024 budget that personnel or staff costs for the states could grow more than 10 times to N21.5 trillion from N2.69 trillion.

The government’s N62,000 monthly wage could see states spend more than double to N5.38 trillion on wages. Some have urged the minimum wage to be around N100,000–150,000, making the state’s budget roughly around N8.07 trillion–N13.5 trillion.

Earlier, the Nigeria Governors’ Forum (NGF) said the N60,000 minimum wage proposal was not sustainable, saying that if allowed to fly, many states would use all their monthly allocations from the federation account to pay workers’ salaries.

Read also: Governors, national assembly members should earn N62,000 minimum wage  Mbaka

“All things considered, the NGF holds that the N60,000 minimum wage proposal is not sustainable and cannot fly. It will simply mean that many states will spend all their FAAC allocations on just paying salaries with nothing left for development purposes,” NGF said in a statement.

It added that a few states will end up borrowing to pay workers every month. “We do not think this will be in the country’s collective interest, including workers.”

However, the forum has been criticised for its inability to pay the minimum wage since the federal government reforms have boosted revenue, especially for the states. Last year, the total amount disbursed by the Federation Account Allocation Committee to the three tiers of government (federal, state, and local) rose to the highest in at least seven years, N16.04 trillion, from N11.7 trillion in 2022.

“We know that about 13 states are said to have borrowed N226.8 billion from domestic and external sources for the period between June and December 2023. This is despite the fact that they have also enjoyed an increase in distributable revenue from N786.16 billion in May 2023 to N1.9 trillion in June 2023, and it doubled in July 2023,” Auwal Rafsanjani, executive director of the Civil Society and Legislative Advocacy Centre, said.

“These states cannot claim that they do not have the money to pay their workers. They have never had it so good,” he added.

A Lagos-based civil servant, who spoke on condition of anonymity, wondered, “Why is there always a fight when it comes to the welfare of the masses, while nobody hears when the rich are given oil wells? Who knows how much the legislatures earn despite the figures being bandied?”

“What seems to form a majority opinion is that if you consider the fact that prices have quadrupled in the last year due to the persisting inflation woes, yet most earnings are static, a concerned person will marvel at how the low-income earners have survived,” he added.

The inflation rate in Africa’s most populous nation has accelerated to a record high, largely on the back of federal government reforms, including the removal of petrol subsidies and naira devaluation.

The headline inflation quickened for the 16th straight time to 33.69 percent in April, up from 33.20 percent in March, according to the NBS. Food inflation, which constitutes more than 50 percent of headline inflation, also increased to 40.53 percent from 40 percent.

Rising inflation and sluggish growth in one of Africa’s biggest economies also increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year, according to the World Bank.

Read also: Governors’ comment on N60,000 minimum wage offensive, insensitive – Nigerians

The rising cost of living in the country has further negatively impacted workers’ productivity, a situation that affects their ability to contribute to a more diversified economy and boost growth and development.

Nigeria, home to the largest population of youth in the world, has experienced two recessions in the past eight years that have weakened consumers’ purchasing power and thrown millions into poverty. According to the International Labour Organisation, labour productivity is an important economic indicator that is closely linked to economic growth, competitiveness, and living standards within an economy.

Nigeria’s labour productivity in terms of GDP per hour worked was $7 last year, lower than its African peers such as Gabon ($26), Botswana ($21), South Africa ($21), Egypt ($20), and Algeria ($19).

“Nigerians are resilient people. However, environmental and economic challenges impact our productivity. In the past year, the cost of living and electricity have skyrocketed, affecting overall well-being and ability to work,” Ogugua Belonwu, founder and chief executive officer at MyJobMag, said.

A recent report by SBM Intelligence revealed that Nigerians spend 97 percent of their monthly income on food. And the cost of eating a healthy diet monthly takes 103.5 percent of the current minimum wage.

But going with the federal government and organised labour’s proposed minimum wage of N62,000 and N250,000, respectively, the cost of a healthy diet will take 50.1 percent and 12.4 percent out of the wages.

For transport, which takes almost 100 percent of the minimum wage, the proposed minimum wage of N62,000 and N250,000 will take less than half of the wages.

Typically, when wages rise, it generally heralds good news for workers, indicating improved living standards and increased purchasing power. The uptick in income can boost consumer spending, contributing to economic growth. In the same vein, an increase in labour wages can also fuel expectations of future inflation among consumers and businesses.

The increase in the minimum wage could also affect the Monetary Policy Committee’s (MPC) stringent measures aimed at curbing excess liquidity in the economy to control inflation.

Data from the Central Bank of Nigeria shows that Nigeria’s money supply (M3) surged to N96.97 trillion in April 2024, an increase of five percent from N92.34 trillion the previous month. It also rose year-on-year by 73 percent from N56.05 trillion.

“Notwithstanding the obviously debilitating effect of the cost of living crisis on public sector workers, I think policymakers should be mindful about the potentially inflationary effect of an increase in the minimum wage. Historically, there’s been a strong correlation between the bumping of the minimum wage and a rise in inflation within a 12-month period,” Ikemesit Effiong, partner and head of research at SBM Intelligence, said.

He added that when you consider the fact that the CBN is currently in a contractionary posture, particularly by increasing the MPR in three consecutive meetings and doing a lot of work in limiting the money supply, there are important concerns about how the increase in the minimum wage stands in contrast to current monetary policy and whether the real effects of growth in public sector earnings will be really felt.

“One thing that’s clear is that passing this newfound liquidity into the wider economy will bump demand and, by extension, prices—a situation that’s anathema to this Monetary Policy Committee.”

Ghana, one of Nigeria’s neighbouring countries, increased all public servants’ salaries by 30 percent in 2023. The small country with a population of 34 million saw its inflation rate decline to 25 percent in April 2024 from 37.53 percent last year.

Inflation has been reduced because the country is importing and spending less, as well as deferring payments for things like electricity thanks to the International Monetary Fund.

Nigeria’s stagnant minimum wage is also the lowest among seven African countries. Using an average of N1,500 at a dollar exchange rate, a worker earns $20. But workers in the Seychelles, Libya, Morocco, Gabon, South Africa, Mauritius, and Equatorial Guinea have $456, $325, $315, $256, $242, $240, and $224, respectively, as their minimum wage.

Read also: Minimum wage negotiations inconclusive, says Ajaero as presidency debunks N105,000 proposal rumour

The general feeling among labour leaders is that not enough has been done to ameliorate the economic hardship as it affects workers, which has influenced their hard-line approach to negotiation so far, according to Paul Igbinoba, managing consultant at ProServe Options Consulting.

“Due to the nature and structure of governance in Nigeria, policymakers and implementers usually do not share in the cost and burden of economic reforms,” he said.

An article by Workforce Africa, a HR solutions provider, said the first minimum wage in Nigeria was declared in 1981. At the time, the minimum wage was set at N1,500 per month for public sector employees. This was later increased to N3,000 in 1991.

It said that in 2000, the minimum wage increased to N5,500 and N18,000 in 2011. “However, the 2011 minimum wage was revised to N18,500 in 2013. The government also increased the minimum wage to N30,000 in 2018.”