Implementation of new minimum wage, a call for concern, says CEPAR
CEPAR is a research centre of the University of Lagos, for economic and business policy engagement with both the public and private sectors of the economy.
The group argued that the agitation by the Nigeria Labour Congress (NLC), to demand for new minimum wage is not out of place considering the current economic fundamentals.
They said having to sign the new wage into law is not the issue, but implementing it becomes a burden to both the national and sub-national governments due to fiscal constraints.
In a chart on the trend of minimum wage and selected economic condition indicated that cost of living index, inflationary trend and the capacity of workers to pay for a living has deteriorated over the years.
It is important to note that any point in time a worker should earn enough to afford the basic living cost of the family to ensure productivity.
Giving a statistics, it explained that the minimum wage as at 2004 was N5,500, which is about N183.3 per day or an equivalent of $39.9. It was later increased to N18,000, which represented about 227.3 per cent increase after six years indicating a N600 per day, equivalent of $116.
However, after nine years in 2019, the minimum wage is now increased by 67 per cent to N30,000, or $83.1 at N1,000/day, which the Centre noted that it is less than unemployment benefits paid as social intervention by some countries.
CEPAR, which gave the wage’s economic multiplier effects on implementation and benefits, said it is imperative for a rigorous analysis to determine the net effect of the minimum wage implementation to the economy, after determining the actual financial cost implications inclusive of other consequential costs at both the national and sub-national levels.
It said it was advisable to consider current economic fundamentals and target to productivity in the implementation.
The report explained that “from the 2018 budget, which had a deficit of about N1.96 trillion representing 1.6% of GDP, but the actual deficit at the end of the year was about N3.7 trillion representing 2.9% of GDP due the widening gap between projected revenue of about N7.2 trillion and realized revenue of about N3.9 trillion indicative of low domestic resources mobilization constraining fiscal operations.
“This is more pronounced at the sub-national levels except Lagos. The question is, what is the cost and benefits of the N30,000 minimum wage implementation in Nigeria, and the sources of finance?”
It indicated that there is a welfare loss in the current minimum wage against the previous one, noting that
“As at 2010, the minimum wage was about $116, which is supposed to be around N42,000 in today’s exchange rate. It is evident from that net effect of the new minimum wage depends on the difference between the costs and benefits to the economy.
“However, current federal government wage bill is about N2 trillion, and with an increase of about 67% increase, it is expected that federal government wage bill will surge to around N3.34 trillion considering other consequential costs like pension payment and others.”
“This would mean that the 2019 budget expenditure will adjust to about N10.2 trillion and a deficit of about N3.2 trillion all things being equal.
“This trend will also manifest at the sub-national fiscal positions. A wage increase with no target to productivity is detrimental to the economy,” the report said.
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