POOR TODAY, POOR TOMORROW: MINIMUM WAGE NECESSITY

If we assume that those who are low-paid (people earning below a certain income-line) are poor; we can use the Low-Pay Persistence Theory to conclude that the “The Poor will always be Poor”.

Most proponents of Minimum Wage in Nigeria have highlighted prevailing reasons why the base-pay should be moved from N,7000 to N18,000. Naijanomics is however positing beyond those present advantages to state that earning a Living Wage today goes beyond survival. It reduces the probability of next generation transiting into poverty.

But can Nigeria afford paying a Living Wage (N58,500 –as estimated by Nigerian Labour Congress in 2009)? YES.

But can the government pay the Minimum Wage (N18,000 – as signed into law in 2011)? NO.

Nigeria can afford and sustain the payment of living wage not only to the lucky-few that have jobs, but can also afford the luxury of paying same to the pool of the jobless (extreme economic imagination outside the scope of this writing).

But government will experience difficulty meeting the minimum wage  obligation because we are currently running about 3% budget deficit, in which 58.6% of the N4.2 Trillion is for recurrent expenditure and 12.8% is for debt servicing.

This is no budget review, but a brief gaze into the budget shows that the government will not be able to pay a living wage when almost 70% of entire allocation to Ministry of Police Affairs goes to salary and wages (N2.2 Billion out of N3.2 Billion). But, while the entire Ministry of Police Affairs has N299 Million as capital expenditure, the Office of the Secretary to Government of the Federation has N288 Million to repair general assets, another N299 Million to procure “Non-Tangible Assets” and a salary (N3.9 Billion) that can pay almost twice that of the entire Ministry of Police Affairs.

Another ministry has over N29 Billion to spend in which salary and wages is just barely over 2% (N614 Million) of the entire allocation. Same ministry has over four times (N2.6 Billion) of amount allocated to wages for “Research & Development”.  Construction and provision of fixed asset will gulp almost N22Billion (of course we have been buying transformers and high-tension-cables yearly, since 1999).

These figures may show structural imbalance but a peep into National Assembly, Presidency figures, among others will confirm reasons why the government can not pay.

We conducted an extensive Micro-Econometric analysis of Low Pay Persistence of about 10,000 economically active individuals in different households interviewed for 16 years  (British Household Panel Survey Data -1991- 2006) and we realise that there is a significant state dependence in low pay status in conjunction with some other individual heterogeneity such as educational qualification, geographical location, nature of jobs, and parental background.

In simple explanation; someone who is poor at a previous time (T1) has a high probability of being poor at subsequent period (T2) and “Initial Condition” particularly parental background has a great portion in determining future poverty status.

There is no need comparing the speculated N16 Million monthly earnings of a senator with the newly approved N18,000 pay for the other end, but the realisation that political office holders’ “official income” has increased at a rate 50 times more than other workers (15% increase relative to 800% increase) between 2006 and 2009 calls for action.

We see this action as a necessity and realise that Nigeria as a nation can afford paying her workers a living wage but government’s structural imbalances is making it difficult to even afford the minimum wage.

We conclude that, what these workers need is a “Living Wage” and not “Minimum Wage” and the reason all parties must see it as a “NECESSITY” is because, it does not only deliver the privileged-minority that have a job from the claws of poverty, but it also reduces the probability that their children will be poor.

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