Monday, 13 June 2016

Of wages and productivity

Written by the Editorial board of The Guardian Newspaper

It is quite appropriate that the Federal Government of Nigeria and the Nigeria Labour Congress (NLC) have jointly set up a 16-man committee to review the current minimum wage of N18,000 upwards and suggest other palliative measures that would cushion the effects of the increase in the pump price of petrol from N86.50 to N145 per litre. Life has been hard for the average worker in the face of rising cost of living and there is a need for the government to show a compassionate face to all.

In a democratic setting, negotiations to resolve issues should be paramount. As a result, the committee, coming in the wake of the NLC calling off its strike to return to the negotiating table, is not only welcome, it should find ways to alleviate the suffering of Nigerians and the government should take its recommendation seriously.

Beyond the executive arm of the Federal Government and the NLC, other stakeholders would, however, need to be engaged in order for truly comprehensive and acceptable solutions to be found. Since the issue of minimum wage is a constitutional one, the Minimum Wage Act would need to be revisited by the National Assembly.

In its deliberations, the committee should consider pertinent matters relating to the current state of the economy, welfare of employers, the unemployment situation, fiscal circumstances of states and Federal Government, public sector performance and reward system, and private sector business productivity and efficiency requirements. The committee is meeting at a time when the economy is facing the threat of a recession. The GDP growth rate had fallen from 6.5 per cent in 2014 through 2.7 per cent in 2015 to a negative 0.4 per cent in first quarter of 2016. Few sectors have been spared.
Manufacturing slid by seven per cent. Real Estate, construction, finance, and the oil and gas sector have all witnessed negative growth rates. The economy lost over 500,000 jobs in the first quarter of 2016,pushing the combined unemployment and underemployment rate to over 31 per cent, with labour productivity slowing down considerably.

Meanwhile, the triple impacts of food, fuel and foreign exchange scarcity, along with increases in electricity prices pushed inflation to13.7 per cent in April, 2016, thereby eroding consumer confidence and wiping out the purchasing power of ordinary Nigerians. The welfare of ordinary Nigerians has been severely dented by the rising misery indices and with employee compensation declining by eight per cent in 2015, the people are not only very poor, they are desperately in want. As a result, the NLC is now demanding a 200 per cent wage increase. A judicious approach and intervention, however, is required. Both the Federal Government and the NLC members of the committee should be reasonable in reaching a balanced and realistic solution to the issue of minimum wage. For equity and human dignity considerations, a higher minimum living wage is absolutely necessary. The committee must, however, take into consideration the fiscal situation of most states of the federation, 27 of which are technically insolvent and not able to pay even the current low minimum wage.

One size does not fit all. Admittedly, poor resources management, the excesses, frivolity and wastefulness of state governments need to be curbed. State governments should endeavour to establish such efficiency units in government as has been demonstrated by the Federal Government.

Wage increases must be benchmarked against performance, accountability and reward system in the public sector. Performance criteria and milestones for civil servants must, therefore, be rigorously implemented.

In the private sector, wage increases are expected to be matched to productivity and efficiency targets. Without improved productivity, a large incremental wage increases may simply lead to more job lay-off in the private sector, thereby swelling the unemployment numbers.
For the economy as a whole, long-term real prosperity is driven by increases in labour and total productivity. As such, the committee must look beyond minimum wages and not ignore ways of improving labour quality through improved skills and knowledge and other factors that enhance workers’ productivity and ultimately wages that reflect higher productivity.

Nigeria is in dire economic straits. The Nigerian government, through that committee, has its work cut out for it in the quest for managing a failing economy and making the people feel it is out to truly serve them.

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