New Minimum Wage: It’s the value, not the amount, Stupid

Extravagant government spending on non-essential projects and administrative costs also exacerbates the economic burden on the population. When government resources are misallocated or wasted

New Minium Wage: It’s the value, not the amount, Stupid

Minimum wage: it’s the value, not the amount, stupidNew minium wage: it’s the value, not the amount, stupidNnanke Harry Willie

As the Nigerian worker wallows in the tortuous sea of unprecedented suffering resulting from prohibitive inflationary costs of food, transportation, and other essential and basic items, the conversation has been about approving a new national minimum wage. Unfortunately, a new minimum wage will not necessarily translate to minimized suffering as the issue should be about the value of the wage.

The concept of minimum wage is fundamentally about ensuring that workers receive a fair compensation for their labor, enough to cover basic living expenses and provide a decent standard of living. However, in the context of Nigeria, the effectiveness of the minimum wage is severely undermined by various economic and political factors that erode its real value. Despite periodic nominal increases, the actual purchasing power of the minimum wage has been drastically devalued by several concurrent issues: fuel price hikes, Naira devaluation, electricity tariff increases, import duty hikes, and pervasive corruption and extravagant government spending.

FG offers Labour  N62,000 as new national minimum wage

It is no secret that many Nigerians cannot sustain their living standards and lifestyles with their earned wages as several policies of the President Bola Tinubu administration have drastically eroded the value of their wages and rendered current and, possibly, future wages of many Nigerians worthless!

Funny enough, when Labour leaders of the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) demanded for almost N500,000 as minimum wage for workers, federal and state government officials were up in arms and screaming: “Where do they expect government from?” They (Government officials) however fail to ask themselves the same question as their ill-thought-out policies have taken prices of everything beyond the reach of the majority of Nigerians. In other words, “where does government expect the people to get money from to feed and live in?”

The Erosion of Minimum Wage Value

Fuel Price Hikes

Fuel price hikes have a cascading effect on the economy, influencing the cost of transportation and production, which in turn drives up the prices of goods and services. This is exactly what happened when fuel prices rose from about N175 per liter and over N600 across the country.

In Nigeria, where the economy is heavily dependent on fuel, any increase in fuel prices immediately translates to higher living costs for the average citizen. Despite any minimum wage increases, the real income of workers diminishes as their purchasing power fails to keep pace with the rising cost of essentials.

Naira Devaluation

The devaluation of the Naira significantly impacts the real value of wages. As the Naira weakens against foreign currencies, the cost of imported goods, which Nigeria relies on heavily, rises. This affects everything from food to technology, making basic necessities more expensive. When wages do not increase in line with inflation and devaluation, workers find their incomes are insufficient to maintain their standard of living, effectively nullifying any nominal wage gains. Life becomes even worse when wages remain stagnant. Life actually literally ends for others who lose their jobs as factories and companies fold up due to harsh operatig conditions or lack of effective demand for their products due to overpricing and low purchasing power.

Electricity Tariff Hikes

The increase in electricity tariffs further burdens the average Nigerian worker. Higher electricity costs affect households directly, as well as businesses. The businesses will naturally pass on the added costs to consumers or reduce the quantity and quality of their products. This situation exacerbates the financial strain on workers and Nigerians, who are already grappling with increased prices due to fuel and import costs.

Import Duty Hikes

Import duties are another factor that inflates the cost of goods. Nigeria’s economy imports a significant portion of its goods, and higher import duties mean higher prices for these goods. This not only affects consumer goods but also raw materials and equipment needed for local production, thereby increasing the overall cost of living. A new minimum wage cannot protect Nigerians from an ever-increasing import-duty regime.

Is it not curious that the Nigeria Customs Service (NCS) has been declaring mega-revenues even when imports have dropped considerably? The current model of raising import duty rates each time the Naira drops against the Dollar is as stupid as it can get. The customs is supposed to be a seamless trade facilitator not a revenue collection and profit-making agency!

Corruption and Government Spending

Corruption plays a critical role in the devaluation of the minimum wage’s real value. When funds meant for public services and infrastructure development are siphoned off through corrupt practices, the resulting inefficiencies and deficits are often compensated for by increasing taxes and tariffs, which directly affect the cost of living. Moreover, corruption leads to poor governance and economic instability, further undermining the effectiveness of wage policies.

A highly corrupt environment and system leads to instability of policies as a lot of short-term thinking forms the basis of any new set of government officials whose primary motive is to clear the way for they and their cronies to take advantage of the system and benefit unduly while the people suffer and the society bleeds.

Profligate Government Spending

Extravagant government spending on non-essential projects and administrative costs also exacerbates the economic burden on the population. When government resources are misallocated or wasted, the necessary investments in social services, infrastructure, and economic development are neglected. This mismanagement leads to a situation where, despite wage increases, the quality of life for workers does not improve correspondingly.

Rather than invest in infrastructure to promote large-scale production and enterprise, various governments waste money on white elephant projects, over-bloated self-serving projects that benefit only a few office-holders and political allies. The rest of the money is frittered away on vulgar luxuries such as the latest cars, foreign trips, posh houses, and questionable consumables.

This is also why a lot of social welfare programmes are tokenistic, largely unimpactful and outrightly fraudulent, as the operators see such as piggy-banks corrupt government officials and privileged party members.

What must be done

The issue of minimum wage in Nigeria cannot be effectively addressed by merely increasing the nominal amount. The real challenge lies in protecting the value of the minimum wage from being eroded by external economic pressures and internal governance failures.

Fuel price hikes, Naira devaluation, electricity tariff increases, import duty hikes, and systemic corruption collectively undermine the purchasing power of the minimum wage. To truly enhance the standard of living for Nigerian workers, comprehensive economic reforms are needed.

These should aim at stabilizing the currency, controlling inflation, ensuring transparent and accountable governance, and implementing policies that foster sustainable economic growth. Only then can the minimum wage serve its intended purpose of providing a decent living for all workers.

Labour leaders and the government  will do well to discuss how to make sure that a new minimum wage can deliver the same value as what obtains in decent societies. It should not be a matter of “how much?”, it should be “what value?” is in it for workers and their families?