Fiscal Federalism Sans Social Justice?


On May 11, it will be 40years that the Nigeria Labour Congress (NLC) called  a strike  to mount pressure on government for the enactment of a national minimum wage law.

Comrade Hassan Adebayo Sunmonu, who incidentally turned 80 two months ago, was the NLC president who led the nation-wide popular  action. Under the leadership of one of the most adroit negotiators produced by the labour movement,  the NLC enjoyed the support of students, progressive intellectuals  and even players in the informal sector in the process.

In retrospect, the success of the historic strike could be measured by the fact that in September of  that year the National Assembly passed the National  Minimum Wage Act of 1981 which was signed by President Shehu Shagari.

According to the law, the national minimum wage was fixed at 125 naira a month. There were, of course, logical exceptions for small-scale employers especially in the informal sector.

As required by the International Labour Organisation (ILO) conventions  to which Nigeria is  a signatory, the law came into being on the basis of the “the principle of full consultation with social partners.” So the class sensibilities of labour and employers  were duly respected and government gave leadership.

Now, Nigeria is no less federalist today than it was in the Second Republic that when the national minimum wage law was enacted. The law was not a military decree. The nation was also in a  civil dispensation at it is today. In fact, the 1979 Constitution which was the basic law at the time provided the nucleus for the 1999 Constitution currently in use in the country. None of the 19 states in existence at that period of Nigeria’s history asked to be exempted from the implementation of the national minimum wage law. Yet there were regional disparities in terms of economic strengths and fortunes of the states.

Since the Second Republic successive military and civilian administrations have improved on the value of the national minimum wage until the system  arrived  at the present N30,000 a month.

Historically, there were attempts to tinker with the elasticity in the implementation of the national minimum wage law. For instance, in 1986, at the advent of the Structural Adjustment Programme (SAP), there was a failed attempt to dilute the provisions of the law. The minimum population  of the workforce of a private business organisation expected to implement the law was increased from 50 to 500 under the pretext of encouraging investments.  So, a company could have 499 workers in its employ and pay slave wages. Labour, of course,  resisted the subterfuge.

However, in the last 40 years the national character of the minimum wage  has been significantly  maintained.

The foregoing somewhat encapsulates  the progress made in the evolution of national minimum wage in the countryin  a period of four decades.

It is in  this light that the bill before the National Assembly aimed at removing  national minimum wage  as an item  from the exclusive list should be seen as  ideologically  retrogressive, socially myopic and politically dangerous.

By implication, the notorious bill seeks to murder the principle of   national minimum  wage.If by any accidentthe bill becomes a law, it would widen inequality  and deepen poverty.Instead of making progress  on the path of  building  a just and inclusive society some politicians and their technocrats are bent on reversing the cumulative gains of the last 40 years.

The pertinent issues involved in the attempts to make nonsense of the concept of national minimum wage seem buried in the obfuscating arguments for fiscal federalism in matters of minimum wage determination. The underlying questions of social justice are ignored by the proponents of the anti-labour bill. It is, therefore, important to draw attention to the pitfalls of  this facile pursuit of fiscal federalism while treating matters of social justice with contempt.

To start with, contrary to the distortions brought into the debatefrom  some quarters, the ILO conventionsare  very clear in its conventions on minimum wage as international standards. The principles behind the convention are those of social justice, inclusion, legality of enforcement  and dynamism. The breath and effectiveness  of the application of the national minimum wage cannot be discounted if the purpose of social justice  is to be ultimately achieved in any jurisdiction. In sum, the purpose of the ILO conventions is  “the provision of an adequate living wage.”

This is the point that is often ignored in the technicist  arguments that each state should pay whatever it likes as minimum wage in Nigeria.

Beside international standards there should be Nigerian national standards  hinged on social justice, decency and even morality in the public space  in considering a matter as basic as the lowest income in the society.These are principles that genuine progressives and partisans of social justice defend anywhere in the world.

The unjust treatment of the lowest income earners is another ”open  sore on the conscience” of this society, to borrow a Wole Soyinka’s phrase in another context.

As a fiscal instrument for redistribution,the minimum wage forms part of the package of social protection in a humane economic management. Any government that cares about the welfare of the people must tailor its policies towards guaranteeing decent minimum income. For example, as soon as he got into power American President Joe Biden has put a raise of   the minimum wage on  the national agenda. Biden has been walking the tight rope of protecting the lowest income earners while  also being  mindful of small-scale business in their ability to pay higher minimum wage. The  American leader puts the matter this way: “No one should work 40 hours a week and live in poverty… But it’s totally legitimate for small business owners to be concerned.” A progressive government cannot afford to toy with the question of minimum wage  the way some politicians want to use it to play their game of “true federalism” in Nigeria.

By the way, America is also a federation; but its federalism doesn’t forbid payment of a national minimum wage.Other federations with national minimum wage include  Brazil, India, Germany, Canada, Australia, Belgium and Switzerland.

For clarity,  fixing the minimum wage is not synonymous with a general wage review. The law in question  is not about the whole wage structure. With a national minimum wage each state still maintains its wage structure.  The establishment ministries and  departments in the states still act  independently  on wage reviews as they should do in  subnational units despite the existence of national minimum wage law.

Indeed, it should be the aspiration of every state to paythe lowest income earners well above  the national minimum wage as some states are already creditably doing at the moment. It is in the overall  interest of the economy of the state for workers to earn adequate incomes.

Instead of this aspiration for social justice, some politicians would rather have the legal basis to pay  a worker N10, 000 a month instead of the N30, 000 prescribed by the national law. Waving the flag of federalism, some state governors have said that they  lack the  fiscal capacity to pay the N30,000 minimum wage. On the contrary, the  fact is that payment of the national minimum wage is  not their priority. If minimum wage is a priority, the state governments would cut down on wastes which are erroneously  lumped with genuine costs of governance. When some state government officials say glibly  on television that their governments won’t pay the national minimum wage, they are simply  saying that they would disobey the law.Yet when it pleases these politiciansthey would invoke the rule of law in their relationship with citizens and other tiers of government. The element of morality in the story of this proposed federalism of minimum wage is that the emoluments of government officials are determined by  the central  formular of the Revenue  Mobilisation and Fiscal Commission andnot  by  the relative economic prosperity of  the states. In addition, no one refers to  the principle of fiscal federalism when governors  charter jets to attend  meetings in Abuja and social functions on weekends. A state  whose state  barely generates  the amount of internal revenues that a local government would generate  in another state  would also partake in this jetting pastime without remembering fiscal federalism.

From the tone of the debate,it would appear as if the national minimum wage is  fixed for state and federal workers alone. Yet this is not case.  The national minimum wage seeks to  also protect the lowest income earners in the private sector. So if it is made extremely elastic as the proposed law seeks to achieve, a state could amend its law so that  well-to -do companies could pay their poor workers any amount they so desire  as minimum age. And the ready excuse would be the attraction of investments. The national minimum wage is often enacted in sophisticated  economic environment so that decency is not thrown overboard in policy matters. For instance, it is indecent and immoral for private companies that post hundreds of billions as profits to employ workers as casual hands to circumvent  the payment of the legal minimum wage. Such companies would readily derive  inspiration from state governments that are  also unwilling to pay the minimum wage.

The national minimum wage is also about setting standards. When the federation is hopefully restructured, there would still be national standards and character to things without prejudice to the identities and relative autonomy of  the units. The national minimum wage would help in having decency , compassion and common sense in matters of wages while each state manages its establishment matters independently. It is similar to the standards the national government is expected to set in  other areas in which states also make their own  laws and  implement policies. These sectors include  healthcare, education, agriculture and infrastructure. There can be no federalist argument, for instance,  against setting standards in building durable roads or the making of quality  building materials. Thispoint is worth stressing because left to some advocates of “true federalism” after the restructuring each state would have its own systems of measurements. Hence one state could measure its distance in kilometres while the other does so in miles while you could measure weights  in kilogrammes  in one state while you do so in tons in another because of federalism.

The political economy of minimum wage is such that it should be national because the implications for poverty reduction and tackling inequality  transcend the boundaries of each state.

That is why the voices  of the professional economists including members of the Nigerian Economic Society  should be louder in the debate so that the government and the governed could benefit from their ideas.

By the way, it is remarkable that Shagari signed the 1981 law.  In the  taxonomy of political parties of those days, Shagari’s National Party of Nigeria (NPN) would be  classified as conservative or right of the centre as some would put it. The point at issue here  is that the party in power at the centre  in Nigeria at the time  didn’t claim to be progressive. The progressive parties of the era  only controlled power in some states. Yet the national minimum wage law was passed. Today, the legislation on national minimum wage is a big issue. But you cannot hear the voices of the political parties on this central issue  of social justice. The big and minor parties are rather busy with permutations for the elections that would be held in two years  from now. The politicians  are not telling members of the  public what their policies on this important aspect  of the political economy would be if  their parties come to power at the centre or in the states.

Beyond the arguments of fiscal federalism made by the supporters of the bill seeking to remove the minimum wage from the exclusive list, the case for social justice for the lowest paid workers in any part of the federation should be made trenchantly.

The NLC under the leadership of Comrade  Ayuba Wabba has  aptly described the proposed legislation as a “declaration of war against the Nigerian workers.”

All genuine progressive forcesshould support the NLC as it resists this grand assault on labour.