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Minimum Wage: Reasons Why the Government Must Increase

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Minimum Wage: Reasons Why the Government Must Increase by nairaman(m) : 7:55 pm On Oct 10

Barely three days after calling out its members on a seven-day nationwide warning strike, Nigeria Labour Congress (NLC) and affiliates on Sunday suspended the strike. National President, Ayuba Wabba, said labour decided to suspend the strike following a “firm and formal invitation” by the federal government to reconvene the tripartite committee on national minimum wage on Thursday.

The strike was called because since its inauguration in November 2017, the committee was unable to meet to complete its assignment and make recommendations to the government on a new minimum wage. As the committee reconvenes, Business & Economy Editor, Bassey Udo, reviews the issues likely to shape the direction of the resolution by the committee.

By now Nigerians appear to have come to terms with the stark reality. The agitation by Nigeria Labour Congress (NLC) and affiliates for a new national minimum wage for Nigerian workers has merit.

Evidently, the current economic fundamentals do not favour continuing to keep the current N18,000 minimum wage approved since 2010. Since 2015, the pay became due for another review in line with the provisions of the National Minimum Wage Act (amendment) 2011.

Whatever indices or parameters used to arrive at N18,000 in 2010 must have become grossly obsolete.

Abuja –based economist and chief executive of Global Analytics Consulting Limited, Tope Fasua, said labour has a right to demand for higher wages at the time, given spiraling inflationary rate in the country, which has compounded since the last review in 2011.

Mr Fasua, who is also the Abundant Nigeria Renewal Party (ANRP) presidential candidate, said the value of N18,000 in 2011 has diminished to less than N8,000 today.
Economic Fundamentals

In 2011, Central Bank of Nigeria (CBN) data showed inflation at about 10.8 per cent, with exchange rate of the Naira to the dollar averaged between N151.96 and N155.26.

The country’s gross domestic products (GDP) stood at about $411.7 billion and GDP growth rate at about 8.2 per cent.

In 2018, the NBS put inflation rate in the second quarter of the year at 11.23 per cent, with exchange rate of Naira to the dollar at N306.25, or N362 in the parallel market. GDP is estimated at $375.77 billion since 2017, growing at the rate of 2.9 per cent.

To compute a minimum wage, consideration must be given to the prevailing cost of living index, inflationary trend and capacity of employers to pay a living wage.

Living wage is based on the belief a worker should earn enough income from his or her work to afford the basic living costs of his or her family.

According to WageIndicator.org, living wage is an approximate income a worker needs to meet his or her family’s basic needs for food, housing, transport, health, education, tax deductions and other necessities.

In other words, living wage should take care of the worker’s food costs, housing costs, transport costs, tax/contribution costs and other costs, including medical and children education.

Therefore, in approving minimum wage, consideration must be given to all the essential needs of workers and their families.

But, Mr Fasua said Nigerian government at all levels do not always bear in mind these factors when paying their workers.
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