Conversations for a new wage cap should consider the need for fiscal federalism
The last May Day protest in Abuja and some other places in the country was another demonstration of the growing anger in the land. Frustrated by their worsening conditions, the workers turned a commemorative event into a rowdy conference of agitation for better life, demanding immediate increment in the country’s minimum wage and more respect for them by the government, at all levels.
With high inflation and an economy in distress, many average Nigerians are having a downturn in their living standards, barely able to meet their basic needs. Worst off, however, are workers, particularly those in government employment, whose meagre wages, some unpaid for upwards of 10 months, have been overrun by galloping inflation.
No doubt, the workers had a legitimate cause even if their protest could have been better expressed. Promulgated in 2011 by the Goodluck Jonathan administration, the minimum wage law was due for review in 2016 as it provides for such exercise every four years. Earlier that year, the Muhammadu Buhari administration removed the subsidy on petroleum products, promising, however, to alleviate the negative impact of the policy on the people with N500 billion worth of palliatives. That promise, as the workers noted correctly, has not been kept as government complained about low prices of oil and its subsequent inability to meet its revenue targets.
Meanwhile, the implementation of the N18, 000 minimum wage has been bedevilled by acute difficulties. Many states protested the cap, arguing that they were not solvent enough to pay. It took a national strike by labour to convince all the states to accept it. Even then, payment has been haphazard with many states owing many months in arrears of salary.
The viability of the demand for an upward review of the minimum wage to N56, 000 in the circumstances becomes suspect. If majority of the 36 states find it difficult to pay N18, 000, how will they pay the new wage? Yet the reality on the ground is that the prevailing rate can no longer take any worker home. We therefore believe that the conversation has to go beyond minimum wage and should include resource generation and management as well as increase in productivity, which would herald a viable economy that can sustain not just a living wage that the workers are demanding, but can also support the development and growth of the nation.
To do this, there is an urgent need to overhaul the current resource mobilisation and allocation model in order to allow the country explore and exploit its full economic potential. Besides, the demand for new wage cap reopens the debate on the need to restructure not just the nation’s federalism but also its fiscal template. Indeed, the argument for states to be allowed to exploit their natural resources and manage them to meet the needs of their people have become more compelling in view of the financial impotence of several states in the face of surplus resources at the disposal of the central government, so much so that it dabbles into matters, which ordinarily should be in the province of local governments.
It is obvious that unless the states and local governments improve their resource mobilisation and become less dependent on federal allocation, meeting the obligations to their workers and the people would remain illusory. Incidentally, labour is in disagreement with fiscal federalism in so far as it translates into removing wage matters from the exclusive legislative list of the 1999 Constitution as amended. But this in our view is the way forward, so that every state generates and pays what it can afford.
As the federal government discusses the new minimum wage with the workers, we recommend a frank consideration of the need to empower states to look inwards, increase their productivity and generate what they require to meet their obligations. That, we believe, is the only enduring way forward.
As the federal government discusses the new minimum wage with the workers, we recommend a frank consideration of the need to empower states to look inwards, increase their productivity and generate what they require to meet their obligations