By Peter Ozo-Eson
An article titled “NLC and Minimum Wage: The Task Ahead” has recently been circulated by Salihu Moh. Lukman. The said article is claimed to be a reaction to a press release issued by the President of the Congress on the issue of the constitutional provision for the enactment of a national minimum wage and attempts to amend it.
Rather than focus on the arguments for and against the amendment being debated, Mr. Lukman went on his usual tirade of seeking to run down the leadership of the Congress. On a number of occasions in the past, he had embarked on this same limelight seeking and self serving mission, but Congress had decided to ignore him as he was not really anybody of consequence. In the process leading to the fuel price increase in 2011, he played all manner of behind the scene games of trying to undermine the NLC’s opposition to the planned increase.
In the course of hearings on the issues proposed for constitutional amendment, flaunting his new credentials as consultant to the Governors Forum, he made puerile arguments as to why some states cannot pay the minimum wage. He also had, shortly after the end of Comrade Adams Oshiomhole’s tenure as President of the Congress, issued a statement in which he berated the comrade and sought to run him down.
His present article clearly demonstrates that he lacks knowledge and understanding of the theoretical underpinnings of national minimum wages and even the empirical information of the process and mechanisms for the setting of the minimum wage in Nigeria.
While he was a staff of the Congress, he was not involved in the formulation of positions on this matter and the negotiations which preceded the setting of the minimum wage. Unfortunately, illusions of grandeur would not allow him seek available information and knowledge on the subject matter.
According to him, “there is certainly both conceptual and empirical problem with respect to the framework for minimum wage legislation in Nigeria”. In terms of concept, it is important to focus on the rationale and logic of a minimum wage. The basic rationale for the fixing of a minimum wage is to ensure that employees, particularly the unorganised and unskilled, are not exploited by their employers to the extent that their pay becomes so low that it creates a pool of the working poor.
This logic was clearly established in the Harvester decision of 1907 in Australia which established a “living wage” for a man, his wife and two children to “live in frugal comfort”. It is this logic of protecting the most vulnerable and setting a floor below which living standards of workers must not fall that is at the heart of minimum wage theory.
Many other countries followed as illustrated by the following examples:
· In 1909, the Trade Boards Act was enacted in the United Kingdom.
· In 1912, the State of Massachusetts in the United States set minimum wage for women and children.
· In 1938, minimum wages were introduced nationally in the United States as part of the Fair Labour Standards Act.
· In the 1960s, minimum wage laws were introduced in Latin America as part of the programme of Alliance for Progress.
Most countries of the world have since followed these examples. Thus, out of 194 countries reporting in 2011, only 21 or 10.8 percent indicated that it had no minimum wage legislation or arrangement of one form or another.
Yes, minimum wage is set for all workers and not for government employees only. In fact it is an unfortunate commentary on the state of affairs in our nation that governments, as employers, should be wrangling over whether to pay the minimum wage or not.
As major employers, they along with major private enterprises, should avail themselves of the framework of collective bargaining to determine wages and conditions of employment. Ordinarily, such negotiated wages would be far above the legislated minimum wage which is meant to protect the most vulnerable workers in areas of the economy where collective bargaining may not be feasible.
With respect to the process of fixing the minimum wage, Mr. Lukman should try to properly educate himself before making comments. Why otherwise would he argue that “the process leading to passage of the 2010 Minimum Wage Act was dictated by the capacity of the Federal Government to pay ₦18,000?
The process involved the setting up of an ad hoc Committee, which made recommendations to the Federal Government. The committee was composed of equal representatives of the tripartite partners of government (including the State Governments), Employers’ representatives and Workers’ representatives and was chaired by Justice Alfa Belgore.
The Committee, in carrying out its assignment, called for memoranda from all levels of government, specialized agencies and organisations and analyzed relevant economic data. Among organisations which submitted reports of studies were the Central Bank, NISER and the National Planning Commission.
A study was also conducted for the committee on remuneration capacities of Small and Medium Scale Enterprises across the country. The ₦18,000 recommended was the outcome of the synthesis of the various submissions from state governments, the organised private sector, labour and studies on the cost of living and the ability to pay by Small and Medium Scale Enterprises. Mr. Lukman could easily have found this out if he took time to read the report.
This committee made a recommendation to the Federal government, which then submitted a bill to the National Assembly the enactment of which led to the Minimum Wage Act. The model followed derives largely from the ILO Minimum Wage Fixing Convention 131, 1970 and represents best practice globally.
Mr Lukman and those he consults for seem to be confusing the issue of minimum wage protection for the most vulnerable workers with the issue of fiscal federalism. If fiscal or financial autonomy were the issue, private firms would not be brought under minimum wage laws anywhere in the world. Yet, our internal study has shown that there are minimum wage regimes in 173 of the 194 countries responding in 2011.
With specific reference to the practice of minimum wage under federalisms, we have examined all countries whose constitutions are federal in the world. There are a total of 26 federal nations in the world. An analysis of the minimum wage jurisdictional typologies in these countries lays hollow the argument of Lukman and his sponsors who are seeking to politicise the minimum wage discourse.
Of the 26 federal states, 16, including Nigeria, have the jurisdiction for minimum wage setting exclusively located in the central government. Exclusive jurisdiction resides in the regions or states in 3 countries, while shared jurisdiction operates in 1 country, the United States of America. Information could not be obtained for the newest federation, South Sudan, while 5 countries had no statutory minimum wage.
This analysis shows that jurisdictional arrangement is not an issue of federalism. Rather, it reflects the historical path and efficiency considerations of individual nations. The case of the United States is interesting. Although several states were the first to institute minimum wage legislations, the federal government still came around to legislate a national minimum wage under the Fair Labour Standards Act. Today, though shared jurisdiction continues to exist, the federal minimum wage is binding across all states and states can only set minimum wage levels which are above the federal level.
This point is particularly important for the debate in Nigeria. Those clamouring for a transfer of the subject of minimum wage from the exclusive to the concurrent list fail to realise that even that will not confer autonomy on the states. Once a federal minimum wage is set, no state can set its own minimum wage below the federal level since for matters under the concurrent list, where there is conflict between a federal and a state law, the federal law will override.
Moving the minimum wage to the concurrent list could create an undesirable situation over time where state minimum wage variations across states become a “beggar-thy-neighbour” instrument in seeking to attract economic establishments to locate in states. It is to avoid this type of injurious competition that income tax – be it personal or company – is legislated on exclusively by the centre. Moreover, a multiplicity of minimum wages will serve to create a segmentation of the labour market, which could weaken national economic cohesion.
While we do not begrudge Mr Lukman the right to choose whose interests to serve, we wish to advise him that running down organisations and others is not the proper way to crave attention. Nevertheless, we continue to wish him well.
Dr. Peter Ozo-Eson is NLC’s Director of Research