Thoughts On New Minimum Wage

By Oye Eribake   

A wage is monetary compensation or remuneration paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed or at an hourly or daily rate, or based on an easily measured quantity of work done. On the contrary, salary is a fixed regular payment made by an employer, often monthly, for professional or office work done as opposed to manual work.

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The term “minimum wage” implies minimum legislated remuneration of an employee whether in public or private sector. In Nigeria, we find that the organised private sector (OPS) is usually just guided by the minimum wage because their compensation packages reward employees fairly adequately and in excess of the minimum wage. On the other hand, the public and informal private sectors regard it like the doctor’s life-saving prescription i.e. not to be varied. Some would rather go below it if they know that they can get away with it. That is why many states shout on roof tops that they cannot afford Federal Government determined minimum wage. The extravagant life styles of the governors, however, belie such assertions.

Like it or not, fresh negotiations must start soon given the current harsh economic realities; a higher minimum wage is inevitable. It is only Federal Government that has the constitutional responsibility to legislate it; of course that does not mean that the state governors do not have a say. The National Economic Council will drive the process culminating in enactment of an act by the NASS.

One would like to see a situation where the economic well-being of the states is taken into adequate consideration alongside the welfare of their workers in determining the new minimum wage. We have states that are agrarian while some are commercial/metropolitan just as some are rich in mineral resources especially oil and gas. The proverbial saying that all fingers are not equal sums it up! Were the state governments to behave like the organised private sector, the South-South and Lagos states should have been rewarding their unskilled workforce more than agrarian states like Benue.

As negotiations kick-off for a new minimum wage, the parties to the talks should bear this fact in mind. It will not be inappropriate to classify the states according to their resource bases e.g.
Tier 1:Agrarian States
Tier 2:Commercial/Metropolitan States
Tier 3:Mineral Rich States

The negotiators should reach an agreement as to which tier each state belongs. The minimum wage emerging from the negotiations should be the “life-saving prescription” for the poorest/agrarian states. In the spirit of what obtains in the OPS, the more economically viable states should pay more. For instance, commercial/metropolitan states like Oyo, Kano and Kaduna which should fall in Tier 2 can bear a premium (say 20-25 per cent) on this minimum while the oil producing states including Lagos falling in Tier 3 should be able to afford a higher premium (say 50 per cent) over and above the minimum wage.

In other climes, the minimum wage applies across board irrespective of employer’s location or economic sector but, if we must be honest with ourselves, the gulf between the rich and the poor states in Nigeria is so vast and so glaring that an across-the-board minimum wage smacks of inequity.

It seems what we have hitherto termed minimum wage hardly qualifies to be so called; rather it is minimum salary! We hear of “so much” per month! Nothing like per hour or per day. Artisans and their helpers operate on daily rate wage basis. Minimum wage usually seeks to protect this class of workers. Happily enough, they do not wait for any legislation before escalating their wages. Their wages are highly sensitive to the dynamics of changes in cost of living. Wage negotiations in the OPS follow the same pattern; in-house workers unions engage their employers on continuing basis whenever inflation eats deep into their pockets.

On the contrary, Federal and State governments go to sleep once a minimum wage has been set waiting to be roused out of slumber by a tsunami of labour protests. Is there nothing like Wages Commission to regularly adjust wages to ameliorate the impact of inflation? If we have organs of government like NERC and PPRA regulating tariffs and prices which impact on cost of living, it is only logical that there should also be an agency to regulate minimum wage. The Minimum Wages Commission Act should not stipulate any specific amount in order to avoid re-enactments whenever new wages arise.

 In as much as new wages arise in order to cushion the effects of inflation, they should not on their own be seen as causative agents of inflation. This is where sound management of the process comes in. When a new minimum wage is heralded by a tumultuous bang, it is perceived as largesse pretty much like the old “Udoji Award” thus creating another round of inflation.

A wage should be the totality of a worker’s remuneration. If your wage is for example N200/hr and you work 40 hours per week, your wage is N8,000.00 for the week; no more, no less.

Salary administration in Nigeria recognises a plethora of allowances such as accommodation, transport, lunch etc. Let us therefore be clear in our minds what we are talking about especially when it relates to its application in the public sector. Add-ons should only apply to employees on salaries and those on minimum wage.

* Dr. Eribake, an engineer, is a Fellow of the Nigerian Society of Engineers.