The Economics of Minimum wage: The “can-kicking” policies of Buhari.

When most people think about minimum wage, they probably picture a price controls law that discourages organisation from hiring as many workers as they otherwise might. Fiscal policy analyst, who should know better, have argued that a rush into the living wage push could open up the dead pit of fiscal strain at the national and sub-national level.

Africa’s largest economy’s intensive drive to promote a rent economy that benefits very few starters are not helping. Analysts are skewed around the narrow band of the discussion. How will state government pay the new minimum wage?

What most self profess “shackles breaking” advocates will not tell you is that states’ recurrent expenditure obligation was only N1.93 trillion in the fiscal year 2017 while total revenue was N3.58 trillion. At no time since 1999 had recurrent expenditure outpaced revenue at Sub-national level. The closest it came was in 2016 when recurrent expenditure obligations and revenue was N2.399 trillion and N2.472 trillion respectively. The argument for “ poverty wage” is based on baseless conclusions drawn from isolated cases. Osun, Ekiti, Kogi, Benue etc.

Also, it is important to note, that over N29.9 trillion was paid out as compensation to Nigerian workers in 2017 despite profit that remains for firms/self-employed after costs have been covered stood at N77.8 trillion. Government ( federal, state and Local) total wage bill in 2017 was not even up to N3.5 trillion at best. Why should government fiscal condition be the anchor of discussion about wage? Why not profit of business? Why not look closely at the other economic units?

Agreed, raising minimum wages beyond a certain threshold has its own shortcomings. It is true that large numbers of workers can only find jobs if wages are low enough, but it is also essential that we have the right balance between a minimum wage and widening inequality.

One way the government can ensure delicate balance is to compel government and firms to set and pay a living wage on a per hour bases as against the monthly system which has been abused repeatedly. It is disheartening to note that after an hour of work minimum wage earners can barely buy a bottle of water after an hour of work. Those same workers are now expected to pay more than they earn for electricity.

We simply forget about the importance of protecting vulnerable families who lack the bargaining power to command a decent pay package. As we have it today, Nigeria does not have any jobless benefits system, and the outdated employee protections law is not even been enforced. It is now very common to see a Chinese business owner ordering a Nigerian policeman to slap and throw out Nigerian workers.

Globally, at the heart of fiscal policy discuss is how government at all level can redistribute wealth. For a country with only 53.6 million people working full time ( 40 hours +) out of a working population of 115.5 million, politicians looking to improve the fortunes of Nigeria should ideally have the “working poor” and “have-not” at the centre of labour policy discussions.

It is time for President Buhari to stop his “can-kicking” policy and do the needful. A living wage for workers.