Deciphering the Minimum Wage Wahala (Rumpus)!

Deciphering the Minimum Wage Wahala (Rumpus)!

State Governors cannot justifiably tell their people that they lack the ability to pay minimum wages. Meanwhile, the federal government cannot employ subterfuge in its dealing with the states; it must enhance their capacity to pay prescribed wages by augmenting their income rather than depleting it through withholdings meant for the Sovereign Wealth Fund… The business of government is neither to self-administer nor to disproportionally devote state’s resources to servicing government bureaucrats.

There seems to be palaver, strikes, wahala and katakata everywhere in Nigeria over the implementation of the minimum wage, but hardly any real debate on the matter.  Most states in the federation and caught in the maelstrom of protests over their refusal to implement the federally sanctioned minimum wage regime of N18,000 per month. Yet, it seems that those involved are once again playing to the gallery on a critical national issue, without publicly acknowledging their role in the political gambit that has fomented the present public policy wahala.  

This much we know. Last February, just two months ahead of a critical general elections in which the ruling PDP was being vigorously challenged, the National Assembly hurriedly passed the National Minimum Wage Act, which raised the minimum wage from N7,500 per month to N18,000 per month as opposed to the N52,250 per month requested by the Nigeria Labor Congress (NLC) and Trade Union Congress (TUC).  Section 2 (1) of the National Minimum Wage Act states, “As from the commencement of this act, it shall be the duty of every employer to pay a wage not less than the national minimum wage of N18,000 per month to every worker under his establishment.” 

On paper, on the campaign trail and for partisan reasons, the minimum wage law looked mighty good.  It was a politically convenient policy and promise for all involved, including those in opposition, both at the federal and state levels.  If the national population were being played for suckers, they hardly knew it.  Outgoing governors cared less, those running for second term were desperate to be reelected and thus acquiesced, and those who were about to be elected for the first time, figured they would cross the bridge of minimum wage once in office.

Some eight months has since elapsed, and as Nigeria celebrates its fifty-first anniversary, there is animus all over. Nigeria’s political landscape is dominated by the din of the grouse over the contentious minimum wage, which most states seem justifiably reluctant to pay. Nearly seventy percent of the thirty-six state governors still oppose the minimum wage; the national population is angry and the labor unions with the support of umbrella bodies like the Nigeria Labor Congress (NLC) and National Union of Local Government Employees (NULGE), are threatening to upend the national work force system. Meanwhile, there is no serious discourse or debate on the issue.  The National Assembly pretends that nothing is wrong, insofar as it has duly enacted a law; even if that law lacks merit and is not implementable. What we have is wahala galore arising from an erroneously thought-out public policy.

There is a paradox here. Pay in any progressive and egalitarian society should be commensurate to productivity and cost of living. This is even more so in a developing nation struggling to put in place certain regimes and improve its human development and living standards. But there is also the critical factor of the ability to pay, which often, is predicated on the judicious allocation of resources as well as the availability of the resources. 

In the present instance, there is an added paradox. In the midst of plenty -- at least perceptible plenty – where the ostentatious lifestyle of the public officers, the rich and famous speaks volumes, and lawmakers and appointed officials cart home millions every month in cash and monetized perks, and where huge emolument the private sector is so configured that overall pay is subsumed in perks-in-kind and cash bonuses, the minimum wage that applies to a majority of the national population, remains starkly paltry.

What exactly are we talking about? The contentious sum N18,000, is less than the equivalent of a one-way economy class air ticket for the junior government or private sector executives from traveling from Lagos, Yola, Enugu, Benin or Calabar to Abuja. For goodness sake, N18,000 per month, which amounts to N216,000 per annum, translates in real terms to $1,440 per annum, $120 per month or $3.90 per day. The latter amount translates to being mired perennially in the poverty peonage, according to the human development index.

The issue here is not really what states pay or are capable or willing to pay. Rather, it is that a one-size-fits-all nature of the policy and pay scale handed down from the top, overlooks that states do not all get the same revenue allocation from the center; therefore, they do not have the same ability to pay and they all have different costs of living in their various territories, no matter how marginal. Also, all states do not generate that same amount of revenue internally. As Nigerians are fond of saying,  “all fingers are not equal”; likewise all states. It is thus a policy fallacy and an egregious one at that to classify all states as financially equal or lump them into the same minimum wage bracket.

It boggles the mind, therefore, that no one is asking the hardheaded question about what exactly went wrong. Was it that a capital intensive national wage policy was passed by the National Assembly without the input of the implementing states and without any adjustment to the revenue allocation, to accommodate the financial overhang. Typical of Nigeria, such policymaking and implementation track is hardly surprising. Indeed, this whole brouhaha would have been averted, if there had been due diligence in ascertaining the financial and program budget implications (PBIs) of implementing the new wage law.

As things stand, attempts to resolve the wage disagreement is not gaining traction, even though the governors have rallied in in hope of finding a commonly acceptable solution.  The National Assembly has been least helpful, since it does not want to recant its position, having passed the wage bill. But that does not change the fact that there is an impasse.  Nonetheless, it does beg the question, as to why the leadership of the Senate would publicly endorse organized Labor’s ongoing confrontation with those states defaulting in the payment of the N18,000 new minimum wage. Such acts are definitely not aimed at collaborative negotiations or finding the proper solution, as much as politicking and upholding the validity of the Assembly’s action.

The fact remains, however, that any project or enacted law that is not fully funded, risks default and not being faithfully implemented. Indeed, when the dispute between the federal and state governments over the constitutionality of Sovereign Wealth Fund is thrown into the mix, the wage issue, which is invariably tied to already controversial revenue and resource sharing, becomes even more emotive.

Despite the good intention, it has become obvious to all that in the end, political expediency and the biting harsh realities of national economics may trump the overall realization of this noble goal. Finding an answer must begin with dissecting the contentious aspects of the wage bill, or at least, factors that militate against its across-the-board implementation.  Failure to do so amicably may result in decisions on the matter residing with the law courts. Interestingly, those on the two sides in this issue -the federal and the state governments – both have valid claims.

While some see the minimum wage bill as a politically expedient act by the federal government, aimed at assuaging deep-seated national discontent, others view it as albatross for the states that must fund and oversee its mandatory implementation. As much as the working force deserves a raise and cost of living adjustment, the governors are confronted with a huge burden, which regardless of the needs of work force,   must be structured to conform to reality and what is fiscally doable.

There is an added dimension. What good is there; and of what value is a national wage bill that seeks to empower the national work force, but cripples their employer states?  Let’s take two cases as examples. The Power Holding Company of Nigeria (PHCN) reportedly generates some N11 billion monthly of which N7 billion is dedicated to servicing salaries and other emoluments. Also, under the new wage regime as Gov. Peter Obi recently disclosed, Anambra State would expend over 75 per cent of the state’s allocated resources to pay the salaries of less than 50,000 workers, despite other demanding challenges facing the state. 

Clearly, it seems that in formulating the new wage policy, there were insufficient comparative analyses done before putting the wage structure in place.  For one, it seemed that the drafters overlooked the fact that a establishing a new national minimum wage would also translate in an upward and progressive adjustment all existing salary structures that would be impacted. Lessons gleaned from the U.S. on this matter would have been most instructive.

In the United States, the minimum wage structure was established in 1938 under the Fair Labor Standards Act.  It created a maximum 40-hour work week and established how much an employer could work and pay an employee for his or her weekly work. More importantly, it guaranteed fixed hourly remuneration for specific work done, and the attending payment for any overtime work. The minimum wage has since risen from the initial $00.25 per hour, to the present $8.67, per hour, introduced in January 1, 2011. In its 73-year history, the minimum wage has been incremental, rising only by $0.70 per hour between 2007 and 2011. It is noteworthy that the U.S. Congress has never raised the minimum wage to keep up with inflation. In the 90s, the Clinton administration gave the rights to each state to implement their own minimum wage law based on the cost of living in their state. This provision is absent in Nigeria’s new Minimum Wage Act.

Policy Dichotomy galore

The present minimum wage crises are emblematic of ongoing policy dichotomies. The primary premise is failure to find common ground. In enacting and implementing such policies, it is known that the devil is always in the details which seem to be the case.  Hence, the present situation raises the question as to whether the state governors and their representatives in the National Assembly ever conferred about their states’ needs and what they could afford to pay.  One would have considered this an imperative in a nation where states rely heavily, if not solely, on revenue for the center instead of the other way round.

Another aspect of these crises which is hardly discussed, relates to true bipartisanship. Central to the problem, may be the fact that a policy such as the wage bill passed by a National Assembly which is dominated by the governing PDP, may play well in PDP-controlled states, but not in those states controlled by opposition parties.  It is hardly any secret, that the federal government steer more funds and projects to states controlled by the ruling PDP. Perhaps, such perks are partly the dividends of democracy!

If the Federal Government meant well, the Minimum Wage Act should have been progressively benchmarked. As such, the minimum wage would have taken effect from the date of its enactment, for those states able to pay, but also include an effective two-year deadline for all states to effectively comply.  This would elicit three consequences. First, states could plan properly. Second, those states that readily pay the wages would enjoy immediate comparatively advantage the attracting the most productive workers. Third,  those states unable to pay would work out a plan to do so in two years, while investors would be inclined to site or move their production industries to those states where labor wages and overhead production costs are cheaper, but not illegal. 

Another policy failure is that the Minimum Wage Act did not tie that prescribed wages to hourly pay, but left it within the executive salary structure. In doing so, the states were handicapped, since they are compelled by law to pay such wages regardless of whether the job is performed or not. In an era of ghost workers, this is a needless risk and huge burden to assume. Moreover, it was hardly factored in that the huge cost of living requirements in Lagos is not the same in Kebbi, Ebonyi, Edo and  Ondo States.

Missed Points and Opportunities

Let’s face it; there has been a gross error of commission on the part of the legislative and executive branches at the federal level and an equally gross error of omission on the part of the state executives, who are protesting , but only after the fact. Undoubtedly, what is at play is the manifestation and culmination of a policy faux pas, bureaucratic missteps and evident lack of clarity, coordination and engagement at all levels on the minimum wage bill its drafting and eventual implementation. 

All told, the present minimum wage fuss has its roots in the absence of clarity in policymaking and the policy itself, as well as the tendency to be reactionary rather than proactive.  If the states foresaw the minimum wage as problematic, they should have nipped it in the bud before it was passed into law, through their respective representatives in the National Assembly.  The Governors could also have opposed it and forced a compromise that would be palatable to them and a policy they could implement across the board, without sacrificing other sectors or unmet needs in their states. 

The root of the present brouhaha lies also in the lack of credible and hardheaded decision-making and strategizing. It seems obvious that there is a shared vision of payment of higher wages as an indicator of higher and improving standard of living. Such disposition should confer comparative advantage to those states willing to pay, while creating an enabling environment for investors. Higher wages in any state means higher spending power and overall wealth generation and economic boom. Incidentally, it is clear that there is no consensus on the strategy of how to collectively attain that goal.

Those governors who willy-nilly refuse to pay the minimum wage are essentially myopic. They lack vision and strategy.  With their backs understandably against the walls, the best strategy would have been to agree to pay, but also at the same time reform their state tax strategy, so that any increment in wages would reflect commensurate increment in income generation for the states via taxes. That would be a win-win situation for all concerned.  Not unlike the Udoji Award, the working population would get a sense of enjoying democratic dividends, but also meet their obligation to the state in terms of the commensurate taxes paid.

Finally, it seem obvious that a national wage policy should be part of an overall national development and economic growth plan, and not an convenient stopgap measure by the ruling elite, meant to convey empathy and buy the momentary silence of the long-suffering and disenfranchised majority. Any policy so motivated or designed, is hardly progressive, transformative, or reform-oriented and therefore, not implementable or sustainable.

As Suzanne Mettler rightly observed by in a recent New York Times op-ed piece, “the threat to democracy today is not the size of government, but rather the hidden form that so much of its growth has taken.”  This is most applicable in Nigeria. State Governors cannot justifiably tell their people that they lack the ability to pay minimum wages, when they hardly provide water, roads, healthcare or sanitation. Meanwhile, the federal government cannot employ subterfuge in its dealing with the states; it must enhance their capacity to pay prescribed wages by augmenting their income rather than depleting it through withholding meant for the Sovereign Wealth Fund.  Apropos, the “hidden form” of government,  tying the minimum wage to hourly rates and work done, would have been an enabler that would not only address the issues of salary bills bloated by ghost workers, but also streamlining payment to be in tandem with productivity and the ability to pay.  The business of government is neither to self-administer nor to disproportionally devote state’s resources to servicing government bureaucrats.

All told, Nigeria’s democracy continues to reflect a paradox and learning curves. There is a semblance of democratic governance but a dearth of commensurate dividends. Nothing reflects this reality as much as the minimum wage issue and so for obvious reasons.  What this whole saga proves is that in Nigeria governance has bumped along the same old rut.  The tax regime at the federal, state, and local levels remain warped as does income generation. For its part, the national population is not blind to the egregiously acquired wealth being thrown around by politicians, neither are they averse to equitable sharing of national resources.  They have expectations that need to be met, not trifled with. One key lesson here for federal and state technocrats and well as the political leadership, is that when policymakers engage in policies that are weak and opaque, they engage in a disservice to the population and the national establishments.  As always, it backfires!

Meanwhile, Happy 51st Anniversary to my fellow Nigerians, assuming there are things in our nation that we are all entirely happy about.