Minimum Wage, Maximum Wahala, By ‘Tope Fasua
Rather than keep increasing minimum wage, we should go back to the basics and create employment for secondary school leavers, and focus on that segment, not university graduates. We would have ended up spreading the responsibility and keeping inflation at a tamable level.
Labour will most likely have its way in the ongoing jostle for an increased minimum wage. But let me have my say. I am concerned as a private sector employer, who has managed to fulfill his obligations to his staff on a monthly basis, that the quest by the Nigeria Labour Congress (NLC) and sister unions will certainly put all of us under immense pressure, and like the previous experiments, only increase prices across the board for everyone. That is called inflation. Hyperinflation. We are almost exiting one period of galloping inflation, and are about to enter another. The National Bureau for Statistics may tell us it is 17 percent, but the common man knows that prices of the goods that matter have doubled (100 percent) in the last one year at least. Whereas this receding inflation was supply-side led (because sellers of goods had to increase their prices to stay afloat in the face of presidential nonchalance to the exchange rate), this one will be demand-led as more money will be in the hands of civil servants chasing few imported goods.
The promise of diversification hasn’t materialised. Yes, some local producers sprang up in the last few months but they are gasping for breath. The larger part of the coming inflation will be fueled by perception; the perception that everybody now has more money to spend. Nigeria is mostly a sellers’ market. Those who manage to get into business go in with an eye to maximising profit. They are on the lookout for getting more money from the pockets of people. The markets are more imperfect here than in most other places. That is why when there is a 50 percent increase in the price of petrol, transport fares simply double and remain there. The buyers/consumers have no power to challenge or resist this. Everybody just wants to get home as soon as they can. Now we are talking of an increase in minimum wage from N18,000 to N56,000. That is like a 211 percent increment. Only the future knows how the markets will react to this. For now, more than 50 million Nigerian youth are not earning even a kobo at all. It means their lives will be tougher, and they will likely react in a way that will shock all of us.
There is every likelihood that – as was the case in the past – a decision will be reached to assuage Labour, which is a conglomeration of mostly government workers. As in the past, we will have a lot of ‘grammar’ being ‘blown’ in board rooms and presentations made, with billionaire ‘labour leaders’ on one hand and corrupt government officials on the other. It is usually a power game. The decision will hurt the economy and the most vulnerable among us. Nigeria will take several steps backwards, because we are not yet ready to be sincere, or to deal with our problems in a sustainable fashion. As it was in the beginning…
Yes, Nigerian workers don’t need salary increases. What they need is for their salaries to be able to buy more goods and services that is relevant to good living. We have been trying this approach of one-sided increases, which have never augured well for the Nigerian economy. I wish we could think out of the box this time. For one, most Nigerian workers are spending their monies on infrastructure that the government should otherwise make available – water boreholes, electricity generating sets, security, exorbitant school fees, and so on. Elsewhere, society has agreed on what is possible and what is not. Here, those we have saddled with taking care of our commonwealth to provide these amenities have decided to privatise taxpayers’ funds. To make matters worse, they would rather quarantine such monies in secret places than make them available even for the creation of businesses. On the flip side, many of the workers asking for higher wages are not ready to examine their own ways; whether in the perpetuation of corruption, fraud and sharp practices, or in mismanaging their finances with the choices they make. Some want to live like their permanent secretaries, they want their children to attend the same foreign universities as their ministers’ children, and for some, you’ll be shocked to see how they spend at ‘owambes’ every weekend. Some – especially the women – always attend such occasions to show off the latest of their tonnes of clothes and shoes. In this game, no one is ready to come clean and change their ways.
I am hereby trying to summarise why the cons outweigh the pros in this debate, and why I wish we could tow a path less traveled. These increases have never worked. I remember the increases in price level caused under the obasanjo regime, when he raised minimum wage from N250 to N5,500 in the year 2000. All we have ever seen is a devaluation of the currency since then, either through inflation or a deliberate marking down against other major currencies. In short, increases in minimum wage have never worked and it is unlikely to, this time. One challenge peculiar to Nigeria and a few of its peers is that we don’t increase anything by five or ten percent. We are calling for a 211 percent increment. Imagine if prices increased across the board in the same proportion or something close to that?
I am proposing a more reasonable alternative – which I’ve been calling for since the beginning of the Buhari administration. But let’s start by looking at these points:
1. Again, the private sector cannot afford the wage increase at this time. Even MTN just sacked 280 people, among other layoffs by the big companies and banks (which are currently sacking workers and closing down hundreds of branches). Meanwhile, SMEs are meant to be the bedrock of this economy. SMEs have been squeezed dry by the debilitating conditions of doing business here.
People who are not really unionised – like artisans – will only suffer more as they cannot increase their rates. Also, non-unionised private sector workers will suffer greatly as they are booted out or told to make do with what companies can offer; all in the face of increasing prices.
2. Wage increases will only benefit the workers for a short while. Inflation will gobble it up quickly and set us up for another round of agitation for wage increases. This one may even lead to an economic collapse because this economy has been battered by too many malignant diseases of late; notably insane corruption and the massive theft of public funds.
3. People who are not really unionised – like artisans – will only suffer more as they cannot increase their rates. Also, non-unionised private sector workers will suffer greatly as they are booted out or told to make do with what companies can offer; all in the face of increasing prices.
4. We still have a huge problem with the ghost worker syndrome. This new raise will definitely increase the loot that the beneficiaries of ghost worker salaries will take. The last time, the finance minister said she caught 50,000 ghost workers on the federal payroll. But the next thing that happened was that presidential spokesman Garba Shehu jumped in the fray, took over the communication and the whole thing fizzled out. We learnt that they arrested five workers in the cash office, but we know that five people in some cash office cannot be fully responsible for siphoning N13 billion monthly, or N143 billion yearly. Who are the godfathers? I also have it on authority that there are about 60,000 men in the Nigerian Army, but 110,000 on paper. Every state in Nigeria suffers this phenomenon. The way this problem has been handled so far, I don’t believe it will ever end.
5. Civil servants may be able arm-twist us all – because we taxpayers will have to pay for this anyway – but they should remember that they too are part of the corruption and inefficiency problem. Many people don’t go to work but they want higher wages. Others loaf around and close at 3pm. Yet others only go to steal. They are being unfair to the rest of us.
6. The inability to meet up may lead to business closures since private sector businesses may not be able to increase their prices to cover general cost increases.
7. This will lead to a spike in crimes. As workers collect the higher salaries, criminals will also collect these from them. This is because people without any cash flow at all – the unemployed – will suffer even more from the leap in inflation and will become even more desperate. We wish this will not happen but it is the only logical outcome.
8. Most states cannot even pay the present N18,000 minimum wage, how much more N56,000. Many are owing salaries for 15 months, and some for a full two years. Why are we digging further when we know we are in a hole?
The more work we create for secondary school leavers, the more graduate jobs will be available. In every country – especially the developed ones – this is the focus. We haven’t done this for decades, so it is apt we try that now.
9. The real situation though, is that civil service wages are dismal – on paper. The highest salary in the service (Grade Level 16, step 9), for a full director eyeing retirement, is N5.4 million (before tax, all allowances included). That is less than N400,000 monthly for someone who has worked for like 33 years (if they are not one of those granted rapid promotions). I had written about this on this platform in 2015 in reaction to people’s lampooning of Dr. Ngozi Anyaegbunam, who, while interviewing an almost-condescending president, seemed to gush, but was asking very pertinent questions. The real issue for Labour is that there is a need to bridge the income gap between core civil servants and those who work in some parastatals, where the entry point salary is equivalent to the director’s salary in the core service. Every government in Nigeria has deliberately avoided this issue, including Buhari’s. An NNPC cannot join this minimum wage issue. Or a CBN or NCC. So, within the same public service, there is a lot of discrimination. The much-higher wages are expected to deter people working in these places from corruption, but we know that in spite of that, they are even more corrupt. Again, refer to Andrew Yakubu and his $10 million ‘gift’.
I have almost shouted myself hoarse that what we need to do is to create a new class of spenders. Rather than keep increasing minimum wage, we should go back to the basics and create employment for secondary school leavers, and focus on that segment, not university graduates. We would have ended up spreading the responsibility and keeping inflation at a tamable level. The more work we create for secondary school leavers, the more graduate jobs will be available. In every country – especially the developed ones – this is the focus. We haven’t done this for decades, so it is apt we try that now. These are what this will do for us:
a. Put money in the pockets of these youngsters and reduce crime. The jobs are there and they are such as will make tremendous impact on society;
b. In the environmental sector alone, there is so much work. Lagos has started something in this regard, with massive unskilled work in that sector, for young people. Whereas artificial intelligence will eventually catch up with Nigeria in a matter of time, we have a short while to reorganise our society by deploying our youth to work in the environmental sector and create a new Nigeria;
c. By getting them to start working early, we can make our youth imbibe the tax culture, financial inclusion and a responsibility to society. This is much better than asking them to go and be musicians, footballers and comedians;
d. This initiative will promote tourism, because foreigners will have more confidence to visit a country whose youth are sorted out, rather than left on the streets by overfed politicians and used as thugs during elections;
These secondary school leavers are the ones that will buy local goods. They do not need to be convinced unlike the rest who are hooked on foreign things. This is a sure way to boost local industries. A large proportion of the monies paid to these youngsters will remain in the country.
e. The civil servants would have effectively gotten an increase in salary because the number of their dependants will reduce. If we pay a secondary school leaver about N15,000 for a four-hour work for about five days a week, that will be enough. I expect labour unions to see this as an advantage. This is about wealth transfer. Let your children be responsible and earn money. It’s even better than you earning the money;
f. These secondary school leavers are the ones that will buy local goods. They do not need to be convinced unlike the rest who are hooked on foreign things. This is a sure way to boost local industries. A large proportion of the monies paid to these youngsters will remain in the country. Since money earned is linked to new productivity, this could result in at least a 15 percent growth in GDP, as against the 1.5 percent predicted by IMF (the hynotists), or the four percent projected by government presently;
g. the budget for this will be much lower than increasing minimum wage from N18,000 to N56,000 for civil servants, 60 percent of who are unproductive or already underproductive;
h. This initiative is a great way of reorganising the civil service. Idle capacity can be transferred to this programme to supervise secondary school leavers. This will be far better than N-Power, which focuses on graduate employment. We need to wean this country away from this obsession with university degrees.
i. China’s biggest achievement is the lifting of 400 million of its people out of poverty. This scheme can lift more than 50 million out of food poverty in Nigeria immediately, because for the indigent Nigerian youth – most of who wake up daily with nothing to do – the first thing to sort out is food for the family (including their poor, ageing parents)
My branch of Economics is called Complexity Economics, and a bit of Behavioral Economics. It is about the fusion of other relevant subjects with the analyses of phenomena in economics. Alas, economists who have floated to the top everywhere have been those with this one-track approach of focusing on figures (which for us are never correct), and not bothering to look beneath phenomena. I believe strongly that the solutions to our myriad problems will be found in the most unlikely places, with some unlikely – and perhaps simple – approaches. I had sent a book I wrote which details some of the above approaches to the government but they were never acknowledged. Time will tell.