Minimum Wage, Double Jeopardy, By ‘Tope Fasua
…the considerations for urging caution before hiking the minimum wage has also increased… If government increases minimum wage today, what happens to the private sector? With an economy growing at 1.5 per cent per annum, while interest rates are at 30 per cent and inflation is in double digits, most businesses…are in their death throes, technically speaking.
The justifications for an immediate raise of the minimum wage have never been stronger than they are today, chiefly because the last raise was effected in 2011. The first thing to do is to consider that money loses value with time. There is one terrible monster called inflation. The sum of N19,800 (nineteen thousand, eight hundred naira only) in the year 2011, is precisely N7,385.40 today if we consider inflation only, at a yearly average decay rate of 13 per cent. At that rate, precisely 62 per cent of the the naira has been eroded by year-on-year inflation since 2011. If we also consider the effect of the other enemy of the common man on a fixed salary, called devaluation, the naira has lost precisely 51 per cent of its value officially since 2011, when it exchanged a dollar for N150, in comparison to today, when it exchanges a dollar for N305. Note that a currency cannot lose 100 per cent of its value or become entirely worthless. So 51 per cent loss here is based on the erosion of value divided by the current value of the currency to the dollar; 155/305. If we take only half of the 51 per cent value loss (since not all goods bought by workers are imported), the true value of N19,800 in 2011 is around N5,538 in real terms today. Or put in another way, we can gross it up and say in order to be on the same standard of living as someone earning N19,800 in 2011, one needs to earn N32,076 today – discounting solely for inflation, and N40,255.38, if we also consider only half of the 51 per cent currency devaluation.
This is the real calculation that labour should confront government with. Looked at this way, there is no way government can escape a wage increase. This scenario throws up serious problems of governance in Nigeria, but not only that, it exposes our socioeconomic mediocrity. This country’s economy is not growing. It is dying. We are merely eating the economy to the bones. How can a country survive massive devaluation and inflation at the same time, and allow this emaciation happen to its people, financially speaking? Is government not supposed to always think from the perspective of the people? Did you ask “what is government supposed to have done”? Successive governments should have ensured that all workers get yearly raises commensurate at the minimum, to its annual inflation rate. This also forces government to manage the economy effectively and keep inflation down. This strategy is only fair, because government is meant largely for the betterment of the people. But not in Nigeria. We usually wait until issues get to a crisis point and strikes begin to happen, such as at a moment like this. The concern is certainly not for the poor people at the base of society. Even labour leaders are extremely rich people, who carry out these protests only half-heartedly, while striking mega billion naira deals for themselves.
But the considerations for urging caution before hiking the minimum wage has also increased. Due to the mismanagement of the economy and the lack of a compelling vision over the decades, we are caught between the devil (wage hike) and the deep blue sea (economic spiral). If government increases minimum wage today, what happens to the private sector? With an economy growing at 1.5 per cent per annum, while interest rates are at 30 per cent and inflation is in double digits, most businesses – except the ones whose rackets have the economy in a bind and their proboscis in government coffers (and those aren’t too many) – are in their death throes, technically speaking. Any business that is struggling to make ends meet will certainly not be able to catch up with paying cleaners or youth corper members’ N65,000 minimum wage. Such businesses will rather lay off staff or close shop entirely. The alternative is for us to accept the opening of a wide disparity between the emoluments of public versus private sector workers, and a mass collapse of struggling small and medium enterprises (SMEs) with the concomitant unemployment crisis. Stagflation will set in very rapidly (stagnant economy coupled with hyperinflation).
What about the states and local governments which are already owing sometimes upwards of 24 months salaries? Where are they supposed to find the N65,000 minimum wage? Or we want to achieve this new wage level only for the federal workers, while leaving others in the ditch? What should government also do about the wide gap between emoluments in some lucky parastatals and what is called the ‘core service’? The highest pay achievable for career civil servants – the last time I checked – is around N5.4 million. That is the total emolument – including all allowances – for a senior Director, Grade Level 17 Step 9, who has probably put in like 32 years of service. This translates to less than N450,000 monthly after tax. This is what some trainees in some ‘lucky parastatals’ earn! No one in the core service will love this kind of thing, and this fuels frustration and corruption. Mind you, the excuse for paying so much in the lucky parastatals is to prevent corruption but we all know that sometimes they are even more corrupt.
How can a country survive massive devaluation and inflation at the same time..? Is government not supposed to always think from the perspective of the people?… Successive governments should have ensured that all workers get yearly raises commensurate at the minimum, to its annual inflation rate. This also forces government to manage the economy effectively and keep inflation down.
So if the government increases the minimum wage for federal workers, the cost of transport, food, housing and sundry daily needs will rise – always inordinately – and this will cause great harm for those who have not seen an increase, as well as those who have no income at all. Yet the government must increase this minimum wage because it no longer makes sense.
Before I offer suggestions about what to do, let me quickly say here that Nigeria is getting to an epoch of decision. I did some research recently which revealed that indeed our crude oil is not as profitable as we think. Or rather that the level of profligate spending we have gotten used to, especially in that sector and among those who control them, is totally mindless. According to the Nigeria Extractive Industries Transparency Initiative (NEITI), Nigeria gets less than 35 per cent of the value of the crude oil it sells – the rest goes to large oil companies and their partners. To make matters worse, out of this 35 per cent, our oil and gas parastatals spend freely, simply because they are the ones ‘making the money’. No sense of responsibility. So less than 20 per cent of the proceeds of Nigeria’s crude (her mainstay), is shared among federal, state and local governments. The time to end these unnecessary ‘largessing’, is now.
I also conducted a research into Nigeria’s budget level, in comparison with those of other countries, and found that we, alongside DR Congo, budget the lowest per capita for our people on a yearly basis. Greed, corruption, myopia, wickedness and oppression have led to a point where no one cares for the Nigerian person and even Nigerians no longer believe they deserve a better life. We seem very satisfied living from hand to mouth, worshipping our oppressors. Nigeria’s budget is the 79th largest in the world, while it’s economy is the 31st largest. Oh I forgot, its population is the seventh largest and that tells a big story. Nigeria has the highest negative variance between its budget level and its GDP level, and it parades the second lowest national budget per person, in the whole world – after DR Congo of course. It is no wonder the Bill and Melinda Gates Foundation says that in the year 2050, half of all poor people in the world will be in Nigeria and DR Congo – a terrible prediction of a sordid future. We have to wake up now!
Anyhow, these fundamental mismanagement is the reason we are here today. A dismal budget means the country does not have a vision or dream for a better life for its people. Indeed the Nigerian government hopes to budget even less next year 2019, meaning that it has even less plans for the suffering masses and certainly no plan for wage increase next year. Nigerians should brace up and stand up for themselves.
If we merely increase wages for those who are lucky to be in employment presently, we wouldn’t have gotten them to be more productive. Those who go to work to sleep will also get wage increases. Those without job functions will get. Even our mighty ghost worker sector, which cuts across all government services, will get wage increases.
So if I am asked, I will urge that we slow down on the way we freely spend our oil proceeds. We should strictly monitor those parastatals that collect revenue on behalf of the country. That they collect revenue does not entitle them to the liberties they take to spend freely. All ministries, departments and agencies of government (MDAs) should be on very strict revenue targets and tight expenditure limits and we should double our budget next year by having a candid look at all revenue sources and ruthlessly going after the vast leakages that have put our country in bad light. Then we should increase minimum wage to say N30,000 and step up wages in the core service across the board. We should also freeze the perks of office of senior officers and politicians – like luxury cars – for the next two years to allow the economy breathe. This is where 25 per cent of our national budgets go anyway. While this is going on, we should create provisional employment schemes for post-secondary school youth, where they can earn, say, N15,000 every month for three hours work a day in the environmental and light security sector, among other unskilled work. This way, we will take the pressure off parents, and create a new spending class, thereby tying wage increase to a new productivity spike.
If we merely increase wages for those who are lucky to be in employment presently, we wouldn’t have gotten them to be more productive. Those who go to work to sleep will also get wage increases. Those without job functions will get. Even our mighty ghost worker sector, which cuts across all government services, will get wage increases. This would be a great tragedy to befall the economy. But if we tie wage increase to a ramping up of productivity, this will translate into a double digit growth for the economy, and even the private sector and SMEs will thrive because they will catch the fever of higher economic activities across the board.
We are truly in trying times.
After rounding up this article, I ran into a 2011 speech delivered by Mallam Adamu Fika, a veteran civil servant. In the speech, he revealed how the Revenue Mobilisation and Fiscal Commission (RMAFC) has created ‘fringe benefits’ of more than 1500 per cent of basic salaries for top civil servants and top political appointees. He also shockingly revealed that the RMAFC biennially increases the remunerations of these same powerful people in government, commensurate with inflation and exchange rate movements, and ‘political exigencies’, while fully ignoring lesser mortals who work for government. I was shocked beyond words. No wonder the president is saying nothing about the wage increase war.