The Minimum Wage Palaver

By Dan Agbese   |   29 November 2015   |   2:14 am  

ADAM-CARTOON--30-8-2015IT sounds disagreeably like a helpless cry of desperation. “We can no longer pay the minimum wage of N18,000 per month,” the state governors wailed this past week. They offered a simple explanation for their apparent insolvency. Crude oil. Always the culprit in our yo-yo economic management. Its price in the international market tumbled from a whopping $126 per barrel to a measly $41 per barrel. Bad news, indeed, for a crude oil dependent economy. It is easy to work out the mathematics of the sudden descent of poverty on an oil rich nation.

It would be dishonest of the rest of us to pretend about the fact that most of the state governments have been wrestling with the implementation of the national minimum wage since it was imposed on them during the Obasanjo Administration. Even the wealthy states have had to grit their teeth to pay. The poorer states have merely managed to do whatever they could to avoid problems with labour.

Not many people would bother to waste their sympathy on the state governors in their dire financial situation. Many of us are inclined to hold them responsible for it, citing corruption and mismanagement as the immediate root cause of the absence of the Naira in reasonable quantities in their treasuries rather than the poor price of crude oil in the oil market.

Interestingly, Governor Adams Oshiomhole of Edo State has broken ranks with his colleagues. He insists the states must pay the minimum wage. Splendid. Labour leadership led him to his present exalted position. He is honest enough to stick with his former colleagues in the labour unions. He fought hard for the national minimum wage and the retention of fuel subsidy. He cannot now, in good conscience, turn his back on labour and sing a different tune. Commendable as his stand is, I find it dripping with sentiments.

Sentiments do score goals but they are unhelpful in the situation in which the state governors find themselves. Truth be told, the N18,000 minimum wage is not a living wage in our inflation ravaged economy. It is a management, as in we dey manage, wage. But what is critical is the ability of the states to pay. If they cannot pay, it is worse than useless to keep it in the books. I am sure Oshiomhole’s ability to pay the minimum wage is not entirely evidence of his right-headed economic husbandry. The fact sticks out: the states are broke. I find the prospects of insolvent states spewing their employees into the labour market positively harrowing.

I am not an admirer of the generally incompetent management of financial resources and the corruption that attends it at the state level, but the state governors are victims of wild public expectations and their own foolishness. The public expects the governors to perform. The governors are anxious to be seen to be performing. And they bite much more than they can chew. They resort to robbing Peter to pay Paul by dipping their hands in the recurrent vote to finance their generally poorly conceived capital projects. The result? No money to pay their civil servants and not enough money to finance their capital projects. Hoisted as they are on the petard of their dilemma, they forfeit public sympathy.

But the problem is much larger than corruption and mismanagement on the part of the state governors. As I see it, the minimum wage palaver raises at least three fundamental issues and gives us as good an opportunity as any now, to respond to them in an honest non-sentimental way.

The first is the nature of our federalism. Our nation is a sad inheritor of a military command structure. The detritus of a long military rule lingers. And we have a federal system in which power radiates from the ogas at the top – from the centre to the states and from the states to the local governments. The anomaly of a centralized federal system does not seem to cause sleepless nights. Pity. The consequence is the federal government’s assumed right to impose on the states burdens they cannot bear – and force them to bear them, even if, in this case, their mosquito-like financial legs crumble under them.

The nature of our federalism is patently hostile to the letter and the spirit of federalism. I have said so elsewhere before. I say it again. Our entire practice is inimical to a system of government that, more than anything else, derives its relevance from the degree of independence it grants to its federating units. Ours is a united and uniform federal system in which the states have a uniform pay structure for their civil servants and public officers. And so, Kebbi State, with near-zero internally-generated revenue, must pay the same salaries and allowances to its civil servants and public officers as Lagos State, about the only state that can survive without the monthly handout from the federation account.

Given this anomalous situation, can we do anything about the inability of the states to pay the minimum wage? Yes, we can. The simple solution is to have federal and state minimum wages. The Americans do. It works for them. The current minimum wage should be federal and applied to federal civil servants only. We must then agree that each state should be allowed to determine its minimum wage, provided no state pays less than half or two-thirds of the federal minimum wage.

My second point is the danger everyone loves to mouth at convenient points – our total dependence on crude oil as the main source of our national revenue. This is not the first time that misfortunes in the international crude oil market have suddenly emptied the treasuries and confronted our rulers with the unpleasant task of scratching the bottom of the barrel. Remember 1981 and austerity measures? We have had warnings about this danger since petro-Naira lulled us into the false belief that we are a rich nation. Despite the danger we have not done much to diversify the base of our economy. Past economic experiments, such as my favourite, the structural adjustment programme, the home-grown alternative to the IMF formula, ended badly, leaving their objectives and our economy in the lurch.

Alternative options seem patently obvious: solid mineral resources and agriculture. Here is a possible obstacle. These resources cannot be tapped like crude oil. They require huge, long term investments. If, as President Muhammadu Buhari has admitted, the country is broke, it means the state cannot finance them to the level that they will count in our alternative revenue generating efforts. There should be no retreat, however. We can manage with a progressive pacing of public and private investments in agriculture and solid mineral resources.

My third point is the need for a shift in our development paradigm. The truth is that we are not developing in any meaningful way. Our arrested infrastructural development points to a deeper malaise in the system, namely lack of investments. It is not news to anyone of us that the federal, state and the local governments commit between 75 and 90 per cent of their annual budgets to recurrent expenditure. This leaves a piffling 10 to 25 per cent ostensibly for capital votes.

This lopsided vote is a clear and dangerous recipe for a backward national development. No country has ever approached this dangerous threshold and witnessed itself make the leap as the Asian Tigers did about a decade ago. Can we reverse it and commit more to capital votes? I do not pretend to have the answer. But I know this: we cannot spend the bulk of our revenue on the payment of salaries and allowances of civil servants and public officers and expect a miracle in our national development. Governments do not exist to pay salaries and allowances. Shifting the paradigm would be painful but we have no choice if, indeed, we want to see a meaningful development at all levels in our rich but poor country.

Nor should we ignore the growing national debt burden. The experts say we have hit the N12 trillion debt sealing – and growing. Is this something to worry about? I think so. A debtor nation is unattractive to foreign investors, the very group of people we are trying to attract here to help refloat the economy. As the Onitsha man would say, the ground just no level.

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