Crying Questions On The 18,000 Minimum Wage Increment

Having closely followed the protracted 18,000 minimum wage rigmarole and the squabble that it generated between the government and the labour leaders, I came to realize that there are some issues that need to be tabled if eventually the state government yields to the pressure of paying the said amount. Flimsy as my opinion may seem, I think there are some crying questions that needs to be answered not minding the rationale behind the agitation.

Does the increase in minimum wage actually mean that there would be an increase in the standard of living of the beneficiaries? Or will it reduce the percentage of Nigerians living below $1 per day? does that mean the recipients would be able to purchase more of their needs? Or does it mean there would be an improvement in the condition of Nigeria's economy? These are the questions the labour union leaders clamoring for minimum wage increment must answer to the holistic clarification of the masses.

According to economist Thomas Sowell, he argued that regardless of custom or law , the real minimum wage is always zero, and zero is what some people would receive if they fail to find jobs when they try to enter the workforce or they lose the jobs they already have.The simplest and most basic economics says that by artificially raising the price of a commodity that is labour , it tends to cause the supply of it to increase and the demand of it to lessen, hence, there would be supplus of the commodity(labour) . And this would result to unemployment since the employers(demand) would not want to employ supplus( employee). Consequently, our labour force might be doomed by this agitation. As a matter of fact, some of the things I would like the labour unions to clarify is wether the increment from 7,500 to 18,000 would not mean that only the skilled and experienced workers would be employed or retained in an organization while the unskilled workers or even fresh graduates would be left unemployed since the employers(government) would have to cut down the cost of running the organizations. As a result, many workers would lose there jobs and many would not be employed . This would result to an increase in unemployment rate which is currently at 41.6% as disclosed by the CBN governor. like an old adage says, an idle mind is the devil's workshop. This foreseeable higher unemployment would result in more nuisance in the country as in the case of Boko Haram , the militants in the niger delta, the ‘agberos ‘ in Lagos, the armed robbers, criminals and many more. All this would discourage investment in the country like the case in Bauchi, Borno and many more.

Also, will this increment not result in too much money in the economy thereby causing inflation which is presently at 12.4% ?. To cub this excess cash in the economy , the CBN might adopt several monetary policies such as increasing monetary policy rate (rate at which the apex bank lends to deposit banks). Interbank interest rate between commercial banks would also increase and this would also result to an increase in interest charged on loans. This would discourage many investors from taking loans from banks and many small and medium scale which constitutes majority of business in Nigeria would go out of business since most of them might not be able to afford paying such a large interest on the loans. Those who remain in business would have to increase the prices of their commodities hence passing the price pressure to the consumers many of whom are not beneficiaries of the increment considering the fact that most Nigerian either live below the poverty line ( less than $1 per day ) constituting about 60% of the population or those that live above it are either unemployed of peasant farmers.

In addition, will the government not as a result of this increment adopt some fiscal policies like increase in taxes , budgetary allocations and so on ? will they not increase the prices of petroleum products to balance the wage increment? will the federal government not remove the petroleum subsidy which the state government are clamouring for ? Will this not have adverse effect on the economy? or will it not increase the population of Nigerian who would have to go to be without food due to excess increase in price of all commodities. Although , I am not saying the labour leaders should not fight for the minimum wage increment , but the government is to blame for signing into law the stipulated wage for the sake of gaining entrance into the political arena only to get into the office and find out that they cannot afford to pay the wage.

Due to the aforementioned fears of mine spewed in the form of questions, I think the labour leaders could employ other means like enforcing the government to give tax credits to workers who fall below a certain income level, giving basic income at periodic times to all of the country's citizens that would be sufficient enough to cover life necessities and so on. All this might save the economy from futher economic meltdown instead of the wage increment.



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Re: Crying Questions On The 18,000 Minimum Wage Increment
Ocnus posted on 07-21-2011, 03:37:41 AM
One of the problems facing Nigerian industrial relations is that the collective bargaining system has not kept pace with the changes in the economy. One of the major shifts in Nigerian capitalism is that a larger proportion of the wage employment has passed from public hands to private hands, especially in the oil and gas, banking and insurance businesses. And yet, rather than institute collective bargaining on a company by company basis most of Nigeria's workers derive their rates of pay and conditions of work from Federal or State decisions on what the appropriate rate should be. This is not the best way to proceed as it is both inefficient and corrupting. If the Federal and State governments determine the wages and working conditions (and the pensions and health care) of workers there is am ability to choose the lowest common denominator for these and to get "settled" by the employers to keep these levels low. Giant oil companies are highly profitable, made so in part by the productivity and endeavour of its workers. Why shouldn't they negotiate directly with the unions to set a fair wage and better conditions based on their profitability and ab9ility to pay? Why should they be bound by national or state norms? It is time that industrial relations are privatised to match the expansion of privatised corporations.
Re: Crying Questions On The 18,000 Minimum Wage Increment
Anonimi posted on 07-21-2011, 05:15:37 AM
Thanks ocnus for your interesting POV above.
I also believe the NLC and TUC should change their negotiation tactics and objectives. They should engage seasoned researchers skilled in statitistics, macro & micro-economics to do a comparative study of the trend in total earnings package of civil servants and political office holders from 1966 (before the 1st military coup) till today. It should be coupled with a study on the productivity of the two sets of earners from government coffers.
They should aim to reduce the differentials so as to return to the ratios that obtained prior to January 1966.
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