The leadership of organised Labour Unions, last week presented a new demand for N56,000 monthly minimum wage, to the federal government. The President of Nigeria Labour Congress (NLC) Comrade Ayuba Wabba told a news conference in Abuja, that even though it is true that the economy is not doing well, but the law has stated that wages for workers must be reviewed after every five years”.
Consequently, the Labour Lord insists that since the last wage review was in 2011, “the issue must be looked into by the Federal government and workers should not be seen as sleeping on their rights”. However, a triple increase in income, in one fell swoop, may seem inappropriate when several state governments are presently incapable of paying the current N18,000 minimum wage, while street cleaners and other Labourers in state government establishments nationwide earn much less. Ayuba, however explained that the “logic behind the new minimum wage is to ensure that no worker earns below what can sustain him or her for a period of 30 days”. Nevertheless, despite their apparent determination, it would not be unexpected, if Labour unions, ultimately, patriotically accept between N30-N36,000 as the new minimum wage, after heated and protracted negotiation; the impact of such increase in incomes will regrettably, however most certainly, cripple the economies of several states, as the resultant simultaneous spiral in salaries of all staff cadres will double the already heavily lopsided recurrent State budgets and further diminish any prospect of impactful social infrastructural development.
Ironically, however, despite the inability to currently pay salaries in several states, Ayuba, has called on government to ensure that the issue of National minimum wage increase “was urgently taken on board as a way of fighting corruption in the country”, because, according to the Labour Chief “ If employers failed to cater for their workers’ welfare adequately, it would be difficult for such an employer to fight corruption”! Unfortunately, Ayuba’s prescription against corruption has continued to be blatantly abused by several states, without any sanction, despite the subsisting Act for a minimum wage of N18,000. Consequently, the nexus between minimum wage levels and corruption is such that, even if the ghost population, in public service is halved, the fifty percent of ghosts, who may ‘survive’ the cleansing will invariably also have their incomes doubled, if minimum wage increases by 100% or more as presently proposed. However, the preceeding narrative does not suggest that there should be no minimum wage level. Indeed, as Ayuba also rightly pointed out, the purchasing value of the present N18,000 wage was equivalent to about N110= $1 in 2011; Sadly, with present exchange rate of N200-300=$1, the purchasing power of the same Naira income against dollar values may have also become halved below what N9,000 can buy today. Furthermore, with average annual inflation rate of about 8%, static minimum wage earners may barely have the capacity to buy the equivalent of 60% of the purchasing power of their incomes five years ago.
Invariably, high inflation rates significantly reduce consumer demand, discourage domestic production and ultimately fuel an already burdensome unemployment rate, with poisonous social consequences. Unfortunately, the very high cost of borrowing caused by an albatross of surplus Naira supply, invariably restrains the real sector’s capacity to also produce competitively for export. Nonetheless, even if Labour succeeds in negotiating a higher minimum wage, it is likely that, they may not be able to enforce compliance nationwide, particularly if state finances remain challenged. Conversely, if by some stroke of good fortune, increasing revenue becomes available to make the payment of N56,000 feasible, the joy of such victory will be quickly threatened by a rise in the general price level, from the already volatile, current spring board of 12.8% inflation rate to well above 20%, so that a N36,000 minimum wage, for example will after five years lose over 90% of its present purchasing power, to trigger another tortuous train of negotiations for a new minimum wage.
Instructively, reprieve from this cyclical bondage may however come, only if inflation can be tamed to best practice rates below 3%; unfortunately, however, an increase in money supply, inevitably caused by 100% rise in wages would, however make such fine achievement in monetary management impossible. Furthermore, increased money supply would also quickly compel CBN to step up the usual, expensive, compulsive counterproductive borrowings, it persistently embarks on to reduce bloated Naira values in the financial system and restrain inflation. Unfortunately, this process also instigates higher interest rates and similarly crowds out the real sector from ready access to cheap funds for expanding domestic production and creating jobs Painfully, this bizarre cycle has predicated our economic misfortunes for so long; thus, it was inevitable that our economy tottered endlessly while unemployment rate continued to spiral, even when we flaunted huge foreign reserves and sustained more modest domestic debt levels. Thus, Labour should recognise, from the preceding narrative, that the joy of a substantial increase in minimum wage would be short lived, while increasingly sporadic wage demands will become more regular, if inflation remains untamed. Unfortunately, organised Labour’s leadership remains rooted in the classical mode of persistent calls for wage increases, notwithstanding the disenabling collateral impact of such demands.
However, it is now expedient for Labour to also carefully examine how countries with larger, and more successful economies manage inflation below 2% to conserve the value of all income earners and sustain the tempo of consumer demand and steadily drive growth; Labour will also need to interrogate why it is seemingly impossible to bring cost of borrowing well below 10% to facilitate real sector growth and export competitiveness. In reality, successful economies everywhere, sensitively manage money supply to ensure that excess money supply does not trigger inflation; furthermore, productivity is also encouraged with very low interest rates which will drive real sector growth. Unfortunately, organised Labour has never shown any interest in identifying why CBN consistently failed to effectively manage Naira supply in like manner to power economic growth as in other successful nations, especially when, CBN does not deny that the monetisation of distributable dollar revenue (read as unilateral substitution of Naira for dollar denominated revenue) is actually the primary cause of persistent excess Naira with its train of disenabling monetary indices such as unusually high inflation and interest rates and a weaker Naira (see monetary thrust statement of vision 2020). Conversely, better liquidity management, particularly in the forex market can gradually strengthen and sustain the Naira below N100=$1. In such event, the subsisting N18,000 minimum wage, would now command a purchasing power of N36,000 without any wage increase or further negotiations. Save the Naira, Save Nigerians!
VANGUARD
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