INTRODUCTION
We commenced this series last week with a brief introduction of what the minimum wage of an average Nigerian worker is N70,000. This, however, is coming after many years of struggling and agitation by the labour unions. We later delved into the definition of the terms of reference – “minimum wage”, “living wage” and “reasonable wage”. We also took a look at a brief history of minimum wage in Nigeria as well as the legal aspect of the National minimum wage. Today, we shall continue with the definition of the term reasonable wage; factors that should be considered while fixing a reasonable wage; the effects of poor take-home pay due to low minimum wages; and finally conclude by proffering some potential solutions and alternatives. Please read on.
Reasonable wage
A reasonable wage is one that fairly compensates an individual for his or her work, covering basic living expenses and ensuring a decent standard of living. The concept of a reasonable wage can vary depending on factors such as location, industry, job role, and cost of living. Here are some key aspects to consider when determining what might constitute a reasonable wage:
Factors to consider in fixing a reasonable wage
Living Wage: This is the minimum income necessary for a worker to meet his or her basic needs, including housing, food, healthcare, and other essentials. A living wage is often higher than the minimum wage and is adjusted for the cost of living in different areas.
Market Rate: Wages should be competitive with what other employers in the same industry and region are paying for similar work. This helps attract and retain talent.
Skill Level and Experience: Employees with higher levels of skill, education, and experience typically command higher wages.
Job Responsibilities: The complexity and responsibility of the job should be reflected in the wage. More demanding or critical roles should be compensated accordingly.
Economic Conditions: The state of the economy can influence wage levels. During times of economic growth, wages may rise, while during downturns, wage growth might slow or stagnate.
Legal Requirements: Wages must comply with federal labour laws, including minimum wage regulations.
Company’s Financial Health: The ability of a company to pay its employees is also a factor. Financially stable companies are more likely to offer higher wages.
Benefits and Perks: Non-wage benefits such as health insurance, retirement plans, paid time off, and other perks contribute to the overall compensation package.
A reasonable wage is a balance between these factors, ensuring that employees can live comfortably while employers remain competitive and financially sustainable.
The effects of poor take-home pay due to low minimum wages
The economic impact
Any wage that cannot meet basic standard of living is nothing but exploitation and should be condemned by all. Workers earning minimum wage often struggle to meet basic needs, such as housing, food, healthcare, and education, which can perpetuate the cycle of poverty. Low minimum wages contribute to widening income inequality, as the gap between the highest and lowest earners increases. Experience has shown that workers with higher disposable incomes are likely to spend more on goods and services, stimulating demand and economic growth. Conversely, low take-home pay can lead to decreased consumer spending, slowing economic growth.
The social impact
The social impact of law minimum wage is more worrisome than the economic impact. Financial stress from low wages can lead to poor mental and physical health outcomes, including increased rates of depression, anxiety, suicide, and chronic illnesses. Also, inadequate income can result in poor living conditions, limited access to nutritious food, and insufficient healthcare.
Low-income families may struggle to afford educational opportunities for their children, limiting social mobility and perpetuating cycles of poverty. Higher minimum wages can provide families with the resources needed to invest in their children’s education and future.
Labour market impact
Low wages can lead to high employee turnover, as workers seek better-paying opportunities. This can increase costs for employers due to recruiting and training new employees. Fair wages can improve employee morale and productivity, as workers feel more valued and motivated. Higher minimum wages can attract more individuals into the labour force, increasing labour market participation rates. While, low wages may discourage people from entering or remaining in the workforce, particularly if the costs of working (e.g., transportation, childcare) outweigh the benefits.
Government and policy impact
Low-wage workers often rely on government assistance programs, such housing subsidies, to make ends meet. Thus, raising the minimum wage can reduce the burden on these programs and potentially lower government spending. The minimum wage is a contentious issue in political debates, with arguments about the balance between fair pay and potential negative effects on employment. Recently, the Federal Government of Nigeria said it can pay what it can afford, even as some of the states have distanced themselves from the benchmark of #60,000 (Sixty Thousand Naira).
My advice is that policymakers and organized labour should also consider the impact on small businesses, employment rates, and overall economic health when determining minimum wage levels. Also, there should be a periodic review of minimum wage to reflect the economic reality of the times.
Potential solutions and alternatives
As noted earlier, the extant minimum wage is Nigeria cannot sustain any good standard of living. There should therefore be a gradual increase or a periodic review of the minimum wage to reflect the economic realities. Also, adjusting the minimum wage based on the cost of living in different States can ensure that wages are more appropriate for local economic conditions. People who work in urban areas should be compensated more than people who work in rural areas. Wage review should take into consideration, the cost of housing, transportation, food, etc.
Combining minimum wage increases with other supportive measures, such as tax credits and job training programs, can provide a more comprehensive approach to improving the livelihoods of low-wage workers.
Conclusion
Addressing the issue of poor take-home pay through minimum wage policies requires a nuanced approach that considers the economic, social, and labour market impacts, as well as potential policy solutions to support both workers and employers. It is doubtful if the Tinubu government calmly took these into consideration. A situation where workers can neither fend for themselves, nor their families is deplorable and must be avoided. It can lead to chaos, anarchy and uncontrollable social unrest.
The festering crisis in Kenya which has led to citizens literally baying for the blood of a once-upon-a-time populist William Ruto is an eye opener to any sensible and reasonable government. Granted that President Tinubu has obviously shown some concern and sensitivity to the plight of Nigerian workers by this new enhanced minimum wage, I dare say it has not done much to ameliorate the quagmire Nigeria is currently meshed in. Not to accept this reality and play the proverbial ostrich is unhelpful. Time is not on government’s side to take more drastic steps to stem the corrosive hunger, anger and mass disenchantment currently ravaging Nigeria.
For now, it is a case of minimum wage, maximum rage.
“Raising the minimum wage does not take from growth, it adds to growth”. (Phil Murphy)