RECENTLY, it was reported that a bill seeking to remove the negotiation on minimum wage from the exclusive legislative list to the concurrent list had passed its second reading at the House of Representatives. In the wake of this report, major news headlines reflected the reaction of the federating states and the Nigeria Labour Congress to this innovation. Punch headline of February 26, 2021, reads thus: “Differential Wage Bill: Oyo, Delta, Gombe, Others Back National Assembly as Labour Fumes.”
It will be recalled I had strongly advocated that the determination of national minimum wage should not be limited to the Federal Government alone, but that the states should be allowed to determine the minimum wage they can pay their workers.
This was captured in my article in the Vanguard and Nigerian Tribune published in 2020 with the headline: “National Minimum Wage: Need to Move from Exclusive Legislative List to Concurrent Legislative List.”
Therefore, the recent move by the National Assembly to pass a bill to move the determination of minimum wage to the concurrent legislative list not only shows that the government is listening, but is equally a step in the right direction for Nigeria to achieve true federalism.
The powers to determine the applicable minimum wage structure is a matter under the Exclusive Legislative List. Item 34 of the Exclusive Legislative List contained in the Second Schedule to the Constitution of the Federal Republic of Nigeria 1999 (As Amended) reads as follows:
“Labour, including trade unions, industrial relation; conditions, safety and welfare of labour; industrial disputes; prescribing a national minimum wage for the federation or any part thereof; and industrial arbitrations.”
The adoption and implementation of N30,000 new minimum wage approved by the Federal Government has brought with it a serious controversy regarding not only the ability of states to pay the amount but also the propriety of the Federal Government imposing a minimum wage on states despite the difference in revenue among the states.
Unsurprisingly, many state governments did not indicate their commitment to the new wage structure and therefore organised labour has again threatened to continue the agitation for nationwide implementation. The reason for the impracticability of uniform implementation of the minimum wage structure is not far-fetched.
Since the drop in oil revenue accruing to the federation which in turn led to a drop in the allocation to the states from the Federation account, many states have been struggling to pay salaries. Speaking out on the issue, the Governor of Ebonyi State, Dave Umahi, declared emphatically that 95 per cent of the states would be unable to pay the proposed minimum wage. He was reported to have stated that:
“The Federal Government collects 52 per cent of the revenue from the federation account and when I tried to put the N30,000 figure to local government areas, LGA, it means they will borrow N1billion to add to their allocation in paying salaries. I will definitely not be a governor to govern such a state and will never preside over a state that will allocate 100 per cent of its earnings to pay salaries…
There is no governor or political office holder that signs cheques but civil servants as the country’s leaders and labour are just putting water inside a basket and praying God to hold it with this minimum wage issue,…We should determine how much should be allocated to education, health, infrastructure among others if 100 per cent of earnings are used to pay workers salaries…Many states are experiencing various problems and cannot pay salaries but the people condemn their governments over their inability to provide good roads and other amenities.”
Again, it is both impracticable and unfair to impose a uniform minimum wage across all the states of the federation as the cost of living varies across the states. While states such as Lagos, Imo, Cross-River, Rivers and the Federal Capital Territory, FCT, rank as expensive cities to live in, states such as Ekiti, Ogun, Oyo, Kwara, Benue and Kaduna have relatively lower costs of living.
While the average cost of renting a three-bedroom flat in the central areas of the FCT is put between N1.5million to N2million, the same amount will be sufficient to purchase and build a bungalow in Ekiti and Kwara states. While only a select number of Lagos residents can afford to live in areas such as Ikoyi and Ikeja Government Reservation Areas, GRA, the same cannot be said of Iyaganku or Onireke areas of Ibadan, with similar layouts but which are open to more members of the public due to the lower costs of living.
This also applies to other aspects such as food, transportation and even cost of education. What this all comes down to is that the local peculiarities vary from place to place.
As Nigeria operates a federal system of government, made up of states with varying standards of living, I consider that the issue of the national minimum wage should not be limited to the Federal Government alone. Also realising this, the Delta State Commissioner for Information reportedly noted thus:
“To rent one room in Lagos is like renting a duplex in Ebonyi State. Why will you pay a man who goes through Lagos traffic daily and pays high transport fares the same amount you will pay a man in another state who does not go through that? Allow states to pay what they can. That is why we are talking about true federalism. You don’t sit in Abuja and fix a wage for us.”
Also, the Chief Press Secretary to the Oyo State governor also reportedly stated that: “Oyo State will welcome the removal of minimum wage from the exclusive legislative list because it’s a way of enthroning federalism in our country. States should be able to determine their wages in accordance with the productivity index of their workforce and the internally generated revenue. It will ensure that wages are directly tied to productivity and not any nebulous projections from the centre.”
Thus, from the above, a National Minimum wage prescribed at the Centre via federal legislation may not adequately address local realities. Nigeria should operate the system that operates in some other countries such as China which delegates the power to determine minimum wages to the local governments or provinces or the United States which operates a hybrid system in which the Centre and the States share legislative powers with regards to the national minimum wage. The advantage of either system is that it allows for local peculiarities to determine the most appropriate minimum wage for each state. Describing the positions in China and the United States respectively, Wikipedia states as follows:
China
“As different parts of China have very different standards of living, China does not set one minimum wage for the entire nation. Instead, the task of setting minimum wages is delegated to the local governments. Each province, municipality, or region sets its own minimum wage in accordance with its own local conditions.
“According to the country’s Employment Promotion Plan, minimum wages are supposed to increase in accordance with local living standards by at least 13 per cent through 2015 and be no less than 40 per cent of the average local wages. Minimum wages under such policies increased by an average of 12.6 per cent rate between 2008-2012.
“However, the growth rate of minimum wage levels decreased in 2016, reflecting the Chinese government’s effort to reduce pressure on enterprises resulting from the uneven growth between labour costs and production rates.”
United States
The minimum wage in the United States is set by US labour law and a range of state and local laws. Employers generally have to pay workers the highest minimum wage prescribed by federal, state, and local law. Since July 24, 2009, the federal government has mandated a nationwide minimum wage of $7.25 per hour. As of January 2018, there were 29 states with a minimum wage higher than the federal minimum.
From 2017 to 2018, eight states increased their minimum wage levels through automatic adjustments, while increases in eleven other states occurred through referendum or legislative action.
The way forward
Undoubtedly, the recent moves by the National Assembly to implement differential wages is a much welcome development. There is a need for adequate deliberations between the state governments, the respective labour groups and other stakeholders to consider those very local peculiarities in determining just how much more the state governments can pay above the nationally prescribed minimum wage.
In other words, the system which I advocated and which the National Assembly is now considering is one in which labour would be able to negotiate directly with individual state governments, using local indices, in making a case for the determination of the minimum wages.
This again, invariably brings up the issue of restructuring which goes beyond issues of geography alone and in reality, involves several other issues and questions inclusive of what matters the states should have legislative competence over, including minimum wage, which I have identified here, being just one of many. I therefore commend the moves being made by the National Assembly to give the states the legislative competence in the determination of minimum wage.
