Minimum wage, maximum wahala – II

From last week, I embarked on a critique of the current quest by labour leaders for an increase in minimum wage. I considered the fact that only the public sector could envisage such an increase given that they have taxpayers’ money and proceeds of natural resources to dip hands into. Also, I considered the fact that a good proportion of the civil service is unproductive and that we have a huge problem with ‘ghost workers’; an idea by which top officers collect salaries and emoluments of workers who don’t exist. I continue with other reasons this week, and proffer solutions that can work:

 5.  Civil servants may be able to arm-twist us all – because we taxpayers will have to pay for this anyway – but they should remember that they too are part of the corruption and inefficiency problem. Many people don’t go to work but they want higher wages. Others loaf around and close at 3pm. Yet others only go to steal. They are being unfair to the rest of us.

6. The inability to meet up may lead to business closures since private sector businesses may not be able to increase their prices to cover general cost increases. 

7. This will lead to a spike in crimes.  As the workers collect the higher salaries criminals will collect it from them. This is because people without any cash flow at all – unemployed – will suffer even more from the leap in inflation and will become even more desperate. We wish this will not happen but it is the only logical outcome.

 8. Most states cannot even pay the N18,000 minimum wage how much more N56,000. Many are owing salaries for 15 months, some for a full two years. Why are we digging further when we know we are in a hole?

 9.  The real situation though, is that civil service wages are dismal – on paper. The highest salary in the service (Grade Level 16, step 9), for a full Director eyeing retirement, is N5.4million (before tax, all allowances included). That is less than N400,000 monthly; for someone who has worked like 33 years (if they are not one of those granted rapid promotions). I had written about this on this platform in 2015 in reaction to people’s lampooning of Dr Ngozi Anyaegbunam, who,  while interviewing an almost-condescending president, seemed to gush, but was asking very pertinent questions. See <http://opinion.premiumtimesng.com/2015/12/31/in-defence-of-dr-mrs-ngozi-anyaegbunam-the-story-of-civil-vs-public-service-by-tope-fasua/>. The real issue for Labour is that there is a need to bridge the income gap between core civil servants and those who work in some parastatals where entry point salary is equivalent to Directors’ salary in core service. Every government in Nigeria has deliberately avoided this issue; including Buhari’s. An NNPC cannot join this minimum wage issue. Or a CBN or NCC. So, within the same public service, there is a lot of discrimination. The much-higher wages are expected to deter people working in these places from corruption, but we know that in spite of that, they are even more corrupt. Again, refer to Andrew Yakubu and his $10million gift.

My solution

 I have almost shouted myself hoarse that what we need to do is create a new class of spenders. Rather than keep increasing minimum wage, we should go back to the basics and create employment for secondary school leavers, and focus on that segment, not university graduates. We would have ended up spreading the responsibility and keeping inflation at a tamable level.  The more work we create for secondary school leavers, the more graduate jobs will be available. In every country – especially the developed ones – this is the focus.  We haven’t done this for decades so it is apt we try that now.  What this will do for us is:

 a. Put money in the pockets of these youngsters and reduce crime. The jobs are there and they are such as will make tremendous impact on society. 

 b. In the environmental sector alone there is so much work. Lagos has started something in this regard; massive unskilled work in that sector, for young people. Whereas artificial intelligence will eventually catch up with Nigeria in a matter of time, we have a short while to reorganize our society by deploying our youth to work in the environmental sector and create a new Nigeria.

 c. By getting them to start working early we can let our youth imbibe the tax culture, financial inclusion and a responsibility to society. This is much better than asking them to go and be musicians, footballers and comedians. 

d. This initiative will promote tourism, because foreigners will have more confidence to visit a country whose youths are sorted out rather than left on the streets by overfed politicians and used as thugs during elections.

 e. The civil servants would have effectively got an increase in salary because the number of their dependants will reduce. If we pay a secondary school leaver about N15,000 for a 4-hour work for say 5 days a week, that will be enough. I expect Labour unions to see this as an advantage. This is about wealth transfer. Let your children be responsible and earn money. It’s even better than you earning the money.

 f. These secondary school leavers are the ones that will buy local. They need not be convinced unlike the rest who are hooked on foreign things. This is a sure way to boost local industries. A large proportion of the monies paid to these youngsters will remain in the country. Since money earned is linked to new productivity, this could result in at least a 15% growth in GDP, as against the1 1.5% predicted by IMF (the hypnotists), or the 4% projected by government presently. 

 g. the budget for this will be much lower than increasing minimum wage from N18,000 to N56,000 for civil servants, 60% of whom are unproductive or already underproductive. 

h. This initiative is a great way of reorganizing the civil service. Idle capacity can be transferred to this program to supervise the secondary school leavers. This will be far better than N-Power which focuses on graduate employment. We need to wean this country away from this obsession with university degrees.

 i. China’s biggest achievement is the lifting of 400million from poverty. This scheme can lift more than 50million out of food poverty in Nigeria immediately, because for indigent Nigerian youths – most of whom wake up daily with nothing to do – the first thing to sort out is food for the family (including their poor, ageing parents) 

Conclusion

 My branch of Economics is called Complexity Economics, and a bit of Behavioral Economics. It is about the fusion of other relevant subjects with the analysis of phenomenon in economics. Alas, economists who have floated to the top everywhere have been those with this one-track approach of focusing on figures (which for us are never correct), and not bothering to look beneath phenomena. I believe strongly that the solutions to our myriad problems will be found in the most unlikely places, with some unlikely – and perhaps simple – approaches. I had sent a book I wrote which details some of the above approaches to the government but they were never acknowledged. Time will tell.