Who to Consider: FG, NLC & Laborers?
For the past two weeks, the front page of local newspapers across the nation has the headlines the Federal Government do not want to see –minimum wage. No matter how much the government tries to avoid it, it follows her like a shadow year after year until she succumbs to its demands. However, the increment of minimum wage seems to be more politically motivated than economically stirred but who is to blame?
Laborers need Jobs, they have a right to fair payment to enable them meet up with their basic needs, NLC on the other hand have a duty to ensure the rights of the laborers are protected while the government have a duty to stabilize the economy. Let us examine the minimum wage debate and the implication of certain decisions and actions taken on minimum wage can affect this three components.
Minimum wage, simply put is the lowest wage stipulated by the law of a state or nation for employers to pay its employees. The concept of minimum wage was given a legal backing in 1894 in New Zealand. The initiative behind it is to help the low skilled workers earn a decent living at least.
Like every other thing that is subject to change, minimum wage also changes. In 2004 the minimum wage in Nigeria was #5,500, in 2007 it increased to #7,500 and in 2011, an agreement between FG and NLC brought minimum wage to #18,000 which is currently under intense debate.
In times like this when the Nigeria commodity market is unstable and unfavorable and very tasking on the average and poor Nigerian, how can a man fend for his family when he earns barely #18,000 monthly (that is #600 per day). This is what prompts the NLC to always push for a reviewed minimum wage but in the past; the increment of minimum wage has changed little or nothing as regards the standard of living in the nation still the average laborer rejoices at the motion of a review of minimum wage.
However, Fact remains; there are implications for an increase in minimum wage and I will like to examine a few.
Implications of Increment in Minimum wage in Nigeria
Generally, when minimum wage is increased employment is negatively affected. This is influenced by two factors. Firstly, as earlier mentioned minimum wage was established to favor the low skilled workers more thus, companies hire low skilled workers because they are less expensive thereby reducing cost. However, once minimum wage is increased companies may likely switch to capital intensive labor rather than spend that much money on low skilled labor that may not yield quality result. Secondly, higher wage will affect the company’s expenses (cost) which will in turn affect the pricing of their product. These factors lead companies to retrench workers and also discourage them from employing low skilled labor. In Countries like the US where laborers are paid on hourly basis, employers reduce the work hours of the employee in other to meet up with both the new set minimum wage and their cost.
Another effect of an increased minimum wage peculiar to third world countries; Nigeria inclusive, is Inflation. When minimum wage is increased, the wage push inflation will take effect as well. Also, the government’s recurrent expenditure sky rockets and this will lead the government to borrow more. For instance, in 2011 after the minimum wage increment, government’s finance on wages increased from #800 billion to #1.8 trillion. Another effect is employers reducing their on-the-job training programs. These are but a few implication of an increment in minimum wage.
So before we all rejoice at the prospect of a proposed #30,000 minimum wage, let us also consider the implicating factors especially the wage push inflation effect.
I recommend that government takes a more reasonable approach to tackling the matter of minimum wage, rather than increase minimum wage government should enhance the labor market opportunities in such a way that will not increase cost for the employer. Government can improve social welfare services such as establishing food stamps, subsidize cost of housing, give out cash benefits although this have its own disadvantage as it could trigger laziness in a lot of people however it will be more effective and have less negativity on the economy and in the end both FG, NLC and laborers can have a smile.