Nigeria’s Minimum Wage Is Too High At $80 A Month – Don’t Raise It

There’s a threat of strike action in Nigeria over the new possible level of the national minimum wage. The problem is that the demand of N 30,000 (call it $80 among friends) comes when it is obvious that the current minimum wage is already too high. Yes, $80 is to high. Note that’s not an hourly sum but a monthly and it’s still too high.

We can work to this backwards. Look for what we would think to be the effects of a “too high” minimum wage and then, if we see them, conclude that it is too high.

The organised labour union on Tuesday invaded the presidential villa, Abuja in protest of an immediate implementation of what it agreed with the government as the new minimum wage.

The protest led by the TUC president, Bobboi Kagama, was tagged ‘National day of mourning.’

Kaigama speaking at the scene of the protest insisted that the labour union will not leave the Villa until the governors and executive committee on New minimum wage led by the Vice President Yemi Osinbajo respond positively to their demands.

Do note that we’d all be absolutely delighted if the incomes of the workers in Nigeria were above that N30,000. It’s not that we want incomes to be low after all. It’s how we get to higher incomes that matters:

The Minister of Labour and Employment, Senator Ngige had briefed State House correspondents on Friday last week after meeting behind closed-doors with President Muhammadu Buhari had announced that the Economic Management Team would meet on Monday with the Governors to take position on the new minimum wage.

The Federal Government has insisted on N24, 000 as new minimum wage, the organised labour had on their own maintained that in the last Minimum Wage Negotiation Tripartite Committee, the sum of N30, 000 which the government objected to, claiming that there was no consensus on that.

Ngige maintained that in fixing the minimum wage, the paramount thing was the ability to pay and that government cannot force employers to pay what they cannot afford.

That’s a reasonable enough method of determining matters. What can people afford? But while reasonable it’s not what we should really concentrate upon. Assuming that we’re to have a minimum wage at all – we shouldn’t but politics doesn’t work that way – we should be setting it for the minimum of counter-productive effects:

Daily Trust reports that the labour unions have threatened to embark on nationwide strike on November 6, 2018 if the Federal Government fails to meet its demand on the new National Minimum Wage of N30,000 which, according to them, was agreed upon. The government had since denied that any agreement was reached on N30,000 as minimum wage.

And N30,000 is too high, even the current N24,000 is too high.

For what would we expect to see if the minimum wage were too high? We’d expect to see high unemployment, wouldn’t we? As employers don’t hire that labour to expensive for them. Nigeria’s unemployment rate is put by some at 14%. Thus wages are too high. But that’s to grossly underestimate the real unemployment rate. Which is perhaps closer to 60%.

For that’s how much of the economy is over in the informal sector.

Unregistered household enterprises comprise a significant portion of Nigeria’s economy, accounting for as high as 65 percent of GDP, says the International Monetary Fund (IMF) in a blog article seen by businessamlive.

Rather the point of the informal sector being that it’s not covered by any of the rules which constrain or even improve the formal such. There’s none of that taxation, regulation, health and safety – nor, obviously, minimum wage. The existence of such a large informal sector tells us that regulation falls too heavily upon the economy. Including the effects of having to pay such a high minimum wage.

Sue, we can look at $80 a month and say there’s no way that’s too high. But wages are always relative to productivity. If productivity locally in Nigeria is low then even this low sum can be too high as a minimum wage. Our proof? That something like the majority of the economy entirely avoids this and other state restrictions.

The very fact that so much of the Nigerian economy avoids the minimum wage by dint of being in the informal sector tells is that Nigeria’s minimum wage is already too high. At which point, obviously, it shouldn’t be raised.

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