At last, the labour unions have won their fight for pay rise from N18,000 to N30,000 per month for the lowest paid worker. The labour leaders were smart to have waited for the general elections to be around the corner before they embarked on vigorous agitation for increased pay.
Analysts believe that government’s smooth and quick acceptance of the new minimum wage was because they did not want the issue to negatively affect the chance of President Muhammadu Buhari’s re-election at the polls. The rationale is good. But, it is hoped that Federal Government’s acceptance of the new minimum wage is not an election gimmick that could turn sour after the elections.
It is also hoped that no matter the state of the country’s economy, both the Federal Government and the states will be able to pay the salaries. Recall that up till now, many states have not been able to pay the salaries of their workers and have to go cap in hand to Abuja for federal bailouts to pay workers salaries.
Recall too that with the economic hard times, there has been inadequate revenue accruing to all levels of governance. It may therefore be difficult for many states to pay the new the new minimum wage. But having said that they will pay, they are bound to pay even if they have to resort to looking up to Abuja as usual for federal bailouts again.
Another very critical issue is whether the Nigerian workers will actually be well-off, in real terms when the new N30,000 minimum wage comes into effect. Drawing from past experience, it is safe to say that minimum wage increases have always induced inflation.
RecaIl that the Adebo Cost Of Living Award (COLA award), the Udoji Award and all other increases in the minimum wage in the past resulted in inflation in the economy. It is therefore safe to say that this time time around, the increase in minimum wage will also induce increase in inflation in the
country.
If anything, as in the past when government approved increases in minimum wage, it will trigger price increases in such sectors as accommodation, food items, transportation, drinks and many other services in the economy. With increase in inflation across the economy in real terms, Nigerian workers may actually be worse off. Against this background, organised labour must wake up and ensure that it increases productivity across all sectors of the economy so as to douse the likely debilitating effects of inflation on their increased wage.
Implementation of the minimum wage will pose a lot of challenges for the economy. First, the Central Bank of Nigeria (CBN) would need to deploy series of monetary policy instruments to douse any inflationary trend in the economy. There is no doubting that even now the CBN is already proactively preparing the measures it will take to mitigate the negative effects of inflation as a result of the implementation of minimum wage in the country.
Also, implementation of the new minimum wage will be very challenging for the state and Federal Governments, at a time when more than 50 per cent of government revenues are used for debt servicing and the government would need to also execute some infrastructure projects that would accelerate productivity in the economy.
Recall that not all Nigerians will benefit from the implementation of the wage increase. In fact, millions of Nigerians in the informal sector will not directly benefit from it. Yet, they will be negatively affected by the increase in inflation in the economy that will result from the implementation of the wage increase. So, government must take necessary measures that will benefit the larger
society.
As things are, the government would need to work out a comprehensive approach to the issue so that the implementation of the minimum wage would not derail the country’s growth, but ensure increased productivity, that the government meets all its growth and development targets across all sectors of the economy and that it leads to improved standard of living for the people.
Dayo Onibile
