Nigeria: Minimum Wage - Let States Decide

11 March 2021

Expectedly, the move by the House of Representatives to tinker with the National Minimum Wage Act by transferring it from the exclusive list to the concurrent list is eliciting reactions from organized labour and other interest groups.

We recall that President Muhammadu Buhari, in April 2019, signed into law the new minimum wage bill that increased minimum wage from N18, 500 to N30, 000. Almost two years after the law came into effect, there has been a back and forth on the issue between the organized labour and some state governments.

As at today, we are reliably informed that no fewer than 18 states are yet to implement the new minimum wage. The reasons adduced for the inability to comply with this law include paucity of funds in the face of competing demands.

This newspaper acknowledges the fact that resources available to states vary as the federation account allocation remains the major source of revenue for most of them. Many are abysmally low on internally generated revenue. But that, in our view, begs the question on why workers must continue to bear the brunt of lack of foresight that is so pervasive at that level of government.

We accept that the states have different needs which demand an insightful and practicable means of redressing them in the face of meagre resource allocation. That is not happening because of over-dependence on easy money from Federal allocation as well as internal wastages that gulp the little that is available.

In the meantime, it is vital to point out that the minimum wage set by the federal government is meant to be a benchmark to guide the states and the labour unions in their negotiations. If the House of Representatives is proposing to move the power to set the benchmark from the exclusive list to the concurrent list, then it is likely to generate its own challenges that might even be more daunting than what presently obtains. Through peer review mechanisms, the unions will still be interested in knowing what is going on in the neighbouring states and apply information so gathered in their own activities.

While the lawmakers are set to tinker with the law, organised labour is already spoiling for a showdown as it continues the agitation for nationwide implementation of what has already been agreed on.

However, human capital experts aver that a uniform implementation of the minimum wage regardless of resource availability is not practicable. Some even question why organized labour should insist on uniform implementation when there is disparity in resource availability. There is also the issue of whether a national minimum wage adopted by the federal government can address peculiarities of states. These are arguments that are likely to continue in the hope that it will lead to a solution that will be agreeable to a majority of the interests at play.

That given, it is our considered opinion that the determination of national minimum wage cannot and should not be limited to the federal government alone. Rather, states should be allowed to determine the minimum wage they can pay their workers. In following this line of thought, we are also aware that states are never known to accept to be buoyant enough to attend to some basic matters that can add value to the lives of the people. These states that persistently complain of paucity of fund still manage to allocate to the governors billions of naira as security vote that end up in their private pockets.

We had argued earlier on this page that labour is applying pressure in the wrong places. If government can bring inflation to manageable levels, reduce the cost of living, make education, health, housing and other infrastructure affordable, the issue of minimum wage will become academic. This minimum wage they are clamouring for has already been wipe out by inflation. So, in essence, we suggest that labour adopt a more beneficial strategy in its fight for the welfare of its members. Unless their leaders have run out of ideas, demand for minimum wage is the last option not the first.

On the whole, it is a fact that state bureaucracies were not set up by the federal government. So, that level of government has no business fixing wages for workers whose services it did not engage. It is on this basis that we are compelled to recommend that States should be allowed to determine their wages in accordance with the productivity index of their workforce and the revenue available to them.

All said, we are convinced that the House of Representatives is on the right path as it tries to provide the legal framework that will enable the states and labour do the needful as far as the wage structure of workers is concerned.

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