Report Explains Effect of Nigeria’s Low Minimum Wage on Workers’ Output

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Obinna Chima

A report by the Financial Derivatives Company Limited (FDC) on the comparative assessment between the minimum wage in Nigeria and five other countries, namely, Norway, Luxemburg, the United States, Belgium and The Netherlands, has revealed the effects of low pay in Nigeria on the productivity of the country’s workforce.

The report titled, “Workers’ Day- Solidarity Forever,” issued Wednesday by Lagos-based research and financial advisory firm, showed that the low minimum wage in the country was negatively impacting on workers’ output.

Nigerian workers on Tuesday joined their counterparts all over the world to mark the 2018 Labour Day. They also used the day to renew their call for an upward review of the country’s minimum wage from N18,000 to N65,000.
FDC, in the 17-page report, compared the Gross Domestic Product (GDP), GDP per hour worked, and minimum wage dollar per month between Norway, Luxemburg, the U.S., Belgium, Netherlands and Nigeria.

Compared with the five countries, the findings showed that the Nigerian economy which grew at 0.83 per cent in 2017, had a GDP per hour worked of 3.78 and workers’ minimum wage (dollar/per month) of $50, the lowest of the six countries.
For instance, while Norway’s GDP grew at 1.1 per cent in 2017, with a GDP per hour worked of 75.08, had a minimum wage (dollar per month) of $3,500; while Luxembourg with a GDP growth rate of 4.2 per cent, GDP per hour worked of 73.22, had a minimum wage (dollar/ per month) of $2,230.

Also, the U.S. with a GDP growth rate of 1.6 per cent in 2017, GDP per hour worked at 67.32, had a minimum wage ($/month) of $1,257; Belgium recorded a GDP growth rate of 1.2 per cent, GDP per hour worked of 60.98 and minimum wage of $1,888.34; while the Netherlands with a GDP growth rate of 2.1 per cent, had a GDP per hour worked of 60.06 per cent and a minimum wage of $1,611.

Furthermore, the report listed Cuba, Kyrgyzstan, Bangladesh, Malawi and The Gambia as countries with the lowest minimum wage. For Cuba, with a GDP growth of 4.4 per cent, its minimum wage dollar per month was put at $9; Kyrgyzstan with a GDP growth of 3.8 per cent, has a minimum wage dollar per month of $14; Bangladesh whose GDP growth was at 7.3 per cent, has a minimum wage $/month of $19; Malawi with a GDP growth of 5.6 per cent, has a minimum wage $/month of $28.2; and The Gambia with a GDP growth rate of 5.1 per cent, has a minimum wage $/per month of $37.5.

In another comparison of economic indicators such as interest rates, GDP growth rate and the minimum wage between Nigeria and some other African countries, it showed that Ghana (GDP- 8.5%, interest rate – 18 per cent, minimum wage $/month – $57); Kenya (GDP as at Q3 2017 – 4.4%, interest rate – 9.5%, minimum wage at $/month -$69); South Africa (GDP as at Q4 2017 – 1.5%, interest rate – 6.5%, minimum wage $/month -$206 per month); and Angola (GDP – 0.94, interest rate -18 per cent, and minimum wage at $/month of $68.43 per month).

Also, while Ghana’s inflation was put at 10.3 per cent, its unemployment stood at 5.77 per cent and has an income per capita of $1,707.70, South Africa’s was put at four per cent, unemployment rate at 26.7 per cent and income per capita of $7,504.30, while Kenya with an inflation rate of 4.18 per cent and unemployment rate of 11 per cent, has an income per capita of $1,143.10.

According to the report, unemployment in Nigeria has risen by 44 per cent, from 14.4 per cent in the first quarter of 2017, to 18.8 per cent in third quarter 2017, just as underemployment also increased by 0.8 per cent, to 21.2 per cent in Q3 2017, from 20.4 per cent in Q1 2017.

The Misery Index, which measures well-being in an economy, also worsened in Nigeria, as it rose to 53.34 per cent in 2018, from 51.05 per cent last year, just as income inequality widened by 7.23 per cent to 43 per cent in 2018, from 40.1 last year.

Also, income per capita in Nigeria fell from $2,562.5 in 2017 to $2,457.8 in 2018, while labour productivity worsened from -1.4 per cent in 2017, to -0.9 per cent in 2018.

FDC further put the number of terrorist attacks in the country in the first four months of 2018 at 25. Ninety were recorded in 2017. However, the Human Capital Index rating for the country rose to 152nd place, from the 151st position last year, while life expectancy was put at 53.05.

According to the report, 15.9 million (18.8%) Nigerians are unemployed, with urban unemployment put at 19.9 million (23.4%), while 18 million (21.2%) Nigerians are underemployed.

FDC put rural unemployment at 13.9 million (16.4%), male unemployment at 14.03 million (16.5%) and female unemployment at 18.02 million (21.2%).

The latest National Bureau of Statistic (NBS) figures had shown that unemployment in Nigeria increased for the 12th consecutive quarter since the fourth quarter of 2014.

On state-by-state basis, the FDC report showed Kwara (10%) as a state with the lowest inflation rate. It was followed by Kogi (11%), Delta (11%), Edo (12%), Benue (12%), Taraba (28.4%), Kaduna (29%), Imo (29.5%), Osun (32%), Ogun (34.1), Oyo (37.1%), Rivers (41.8), Akwa Ibom (36.6%), Bayelsa (30.4%), Oyo (37%), Kwara (41.3%) and Rivers (41.8%), in that order.

The report also said that states with high internally generated revenue (IGR) have high allocations from the Federation Account. That is, Lagos with an IGR of N333.97 billion in 2017, got an average of N9.72 billion from FAAC monthly, while Rivers whose IGR was put at N89.48 billion, receives an average of N15.04 billion from the Federation Account, just as Delta whose IGR was put at N74.84 billion received an average of N17.7 billion from FAAC monthly.

In addition, the report revealed that while prices of some foodstuff in Nigeria declined compared with last year, in line with the decelerating level of inflation, some others have maintained an upward trend.

Also, for school fees, the report which reflected the fees charged by two private schools – Holy Child College, Lagos and Corona – showed an increase between 2017 and 2018.

While that of Holy Child rose marginally by 1.117 per cent to N290,000 in 2018, from N250,000 in 2017, the school fees at Corona climbed by 9.96 per cent to N405,000 this year, from the N371,000 last year.

For medical bills, the average cost of X-ray in the country remained flat at N5,000, while basic lab tests rose by 30.8 per cent, to N8,500 this year, from N6,500 last year.

The average cost of internet data however nosedived by 20 per cent, from N1,500 in 2017, to N1,200 this year.
FDC projected an increase in rent and naira liquidity due to election spending, as well as airfares due to high political travelling, between 2018 and 2019.

But while school fees were predicted to remain flat, food prices were expected to increase due to seasonalities and transport fares to be driven by supply shocks, such as fuel scarcity.