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Why Labour’s Unreasonable Minimum Wage Demand Won’t Work

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Lekan Ajayi

The recent demands by organised labour for a substantial increase in the national minimum wage have ignited a fierce debate among policymakers, employers, and the general public. The last recommended minimum wage by organised labour was said to have been N615,000 per month.

While the intention behind these demands is undoubtedly rooted in the need to improve the standard of living for Nigerian workers, the proposed increases are both unreasonable and impractical given the current economic climate.

The economy is currently grappling with numerous challenges, including high inflation rates, a struggling currency, and slow economic growth. An abrupt and significant increase in the minimum wage could exacerbate these issues.

Higher wages would lead to increased production costs for businesses, many of which are already operating on thin margins. This could result in higher prices for goods and services, fueling further inflation and reducing the purchasing power of consumers, including those who benefit from the wage increase.

Small and medium-sized enterprises (SMEs) are the backbone of Nigeria’s economy, accounting for a substantial portion of employment. These businesses often operate with limited financial resources and are particularly vulnerable to increased wage costs.

A steep rise in the minimum wage could force many SMEs to cut jobs, reduce working hours, or even close down entirely. This would lead to higher unemployment rates, counteracting any potential benefits of the wage increase.

History has shown that drastic minimum wage hikes can lead to unintended consequences. Employers might resort to automation to reduce reliance on human labor, resulting in job losses.

Additionally, informal employment—where workers are paid under the table and without benefits—could increase as businesses seek to evade higher wage costs. This would further undermine the formal employment sector and reduce tax revenues, weakening the government’s ability to fund public services.

Nigeria’s economic conditions vary widely across its regions. A uniform national minimum wage does not account for these disparities.

What might be a sustainable wage increase in economically robust areas could be crippling in less developed regions. This one-size-fits-all approach fails to address the nuanced economic realities across the country, potentially deepening regional inequalities.

Instead of demanding an unsustainable increase in the minimum wage, labour unions and policymakers should explore more holistic approaches to improving workers’ living standards.

For example, Implementing smaller, incremental wage increases over time can help businesses adjust and absorb the additional costs without drastic economic disruption. Providing tax relief or subsidies to low-income workers can increase their disposable income without imposing undue burdens on employers.

Creating a more business-friendly environment by reducing bureaucratic red tape, improving infrastructure, and ensuring stable power supply can help businesses thrive, enabling them to pay better wages.

While the desire to improve the standard of living for Nigerian workers is commendable, organised labour’s demand for a steep increase in the national minimum wage is unreasonable and impractical in the current economic context. Such a move could lead to higher inflation, job losses, and increased regional disparities.

A more balanced approach, focusing on gradual wage increases and broader economic reforms, is essential to achieving sustainable improvements in workers’ lives without jeopardizing the stability of the Nigerian economy.

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