THE NEW MINIMUM WAGE: STRATEGIES FOR EFFECTIVE PUBLIC/ PRIVATE SECTOR MANAGEMENT

By NBF News
Listen to article

Ultimately, the impact and usefulness of a minimum wage policy depends on whether minimum wages are paid. This, in turn, depends on the effectiveness of the enforcement mechanism; penalties for violators, adequate compensation for workers whose rights have been breached and suitable resourcing of the enforcement authority, are all crucial factors. But the active involvement of social partners in  both the design and operation of minimum wage enforcement regimes is essential to enhance their impact.' - International Labour Organisation (ILO).

The new minimum wage
The last minimum wage review in Nigeria was done in 2000 during the administration of Chief Olusegun Obasanjo and it appears to be the practice in the country that minimum wages are reviewed every 10 years. It was, therefore, not a surprise when in 2009 the Federal Government put machinery in motion for the review of the subsisting minimum wage. Let me, however, appeal as was similarly appealed by ILO, that:

'Minimum wages should be adjusted regularly to maintain the purchasing power of affected workers in the face of price increases and to avoid large occasional shocks to the economy. The welfare of poor workers and households critically depends on both t heir wages and the prices they face. The adjustment of the nominal minimum wage in the context of increasing prices is thus as important as the setting of the initial rate for a minimum wage. In the current context of sharply increasing food and oil prices and high inflation forecasts for 2008 and 2009, swift adjustment in minimum wages is all the more important.'

The new minimum wage is, therefore, the outcome of rigorous work and consultations by the tripartite Presidential Committee on National Minimum Wage, headed by retired Chief Justice of Nigeria, Justice S.M.A. Belgore. The committee was inaugurated by the late President Umaru Musa Yar'Adua, represented by the former Secretary to the Government of the Federation, Alhaji Mahmud Yayale Ahmed, on July 14, 2009, to review the national minimum wage as well as the Act establishing it. The committee is made up of eight members each from organised labour, organised private sector and the government. The government was represented by four ministers and the Head of Service of the Federation on a representative basis as well as three members from the states, representing different geo-political zones. The organised private sector representation included the Nigeria Employers Consultative Association (NECA), NACCIMA and NASME while the organised labour was represented by NLC and TUC.

The committee examined the relevant economic indices offered by Ministry of Finance, Nigeria Institute for Social and Economic Research (NISER), Central Bank of Nigeria (CBN), relevant laws and conventions of the International Labour Organisation (ILO).

According to Justice Belgore: 'The committee met severally and consulted widely. It further took cognisance of the need to ensure that the outcome of the exercise must be growth-propelled in terms of GDP growth rate. …It also considered its capability of promoting rapid socio-economic transformation of the country, which will not lead to inflation spiral … The objective is aimed at alleviating poverty in the country as well as maintaining macro-economic stability.'

Consequently and based upon the negotiation of the stakeholders, the Justice Alfa Belgore committee proposed the following inter alia, which were forwarded to the Secretary of the Government of the Federation by the chairman of the committee at a widely reported ceremony on July 1, 2010:

A national minimum wage of N18,000 per month for all establishments in the public and private sectors, employing 50 workers and above.

An upward review of the sanctions that would serve as a deterrent to would-be violators of the new national minimum wage. The committee recommended that Section 8 of the Principal Act, which prescribes a fine, not exceeding N500 or imprisonment for a term, not exceeding three months or both, should be amended to 'a fine not exceeding N100,000 or imprisonment for a term not exceeding six months or both such fine and imprisonment.' It also recommended the amendment of section 3 of the Principal Act, which prescribes 'a fine not exceeding N100 and in the case of a continuing offence a fine not exceeding N10 for each day during which the offence continues,' to read instead, 'a fine not exceeding N50,000 and in the case of continuing offence to a fine not exceeding N10,000 for each day during which the offence continues.'

A more frequent review period, not exceeding five years, to be carried out by a statutory tripartite committee that would be appointed from time to time by the president.

That the extant National Minimum Wage Act 1981 and its subsequent amendments of 1990 and 2000 should be repealed and replaced with a new Act to be enacted.

It is very important to note that the Justice Belgore Committee Report was accompanied by a draft new National Minimum Wage Bill of 2010 for onward transmission to the National Assembly.

The Justice Alfa Belgore-led committee recommended that the new wage should apply to organisations with 50 employees and above, and exclude seasonal employment such as in agriculture, workers on part-time basis and allied employment is understandable as the issue of the organisations to which minimum wage should apply in Nigeria has been a contentious one as it is linked to its practical effectiveness.

For instance, it would be recalled that in 1987, 'a controversial decision was taken in February, when the government announced a major relaxation of the nation's minimum wage laws. Under new regulations, all companies with fewer than 50 employees would be exempted from minimum wage requirements; previously, only companies with fewer than 50 employees had been exempted. After concerted and vociferous protests from labour unions and indications of widespread abuse by employers, however, the government reversed its stance and reinstituted the original provision.'

Also commenting on the effectiveness of the proposed enforcement mechanism inbuilt in the new minimum wage, Peter Esele, President-General, Trade Union Congress of Nigeria (TUC) and a member of the Tripartite Committee on National Minimum Wage, stated that:

'For the first time, we want to make it a law that any minimum wage decided at the federal level will be binding for every employer of labour in Nigeria. We want to make a law so that we can use it in holding erring states, companies and establishments liable for defaulting to pay.'  Although the new national minimum wage of N18,000 per month represent an increase of 327 per cent of the 2000 National Minimum Wage (in nominal terms), it is less than 35 per cent of the N50,000 demanded by organised labour and just some 80 per cent of the USS equivalent of the 1981 National Minimum Wage. The US$ equivalent of the 1981 minimum wage which is US$150 when converted into naira at today's exchange rate is N22,500. Also, commenting on the extant minimum wage, Issa Aremu noted that:

'We are legitimately pained with the stories of millions of naira allegedly paid to the legislators monthly. Yet nobody seems worried or alarmed that the subsisting prevailing minimum wage Act, passed in 2000, offers a worker just a peanut minimum wage of N5,500 a month. At the exchange rate of N150 to a dollar, a Nigerian worker earns less than $40 a month now, which in real terms is less than the N125 ($150) a Nigerian worker earned as minimum wage in 1981.'

Issues and challenges
We should not pretend that there are no challenges that would affect the management and implementation of the New National Minimum Wage in Nigeria. The fact is that there are great challenges ahead and it is important to identify these challenges and collectively proffer solutions to them.

Labour market situation
The labour market situation in Nigeria is such that there are too many peopole chasing too few jobs. The level of unemployment and many people chasing too few jobs. The level of unemployment and poverty in Nigeria today is unprecedented. It is so serious that Nigerians are seriously worried by the huge and unprecedented job losses occasioned by (a) The Global economic meltdown (b) The relocation of companies from Niger Delta to other regions because of the Niger Delta security crises (c) The relocation of companies from Nigeria to neighbouring countries because of the hydra-headed power sector problems, the prevalent multiple taxation, security challenges, corruption, terrible conditions of basic infrastructure, the unacceptable high cost of doing business in Nigeria, worsened by the clear manifestation of the so-called voracity effect (i.e. the absence of strong institutions and the prevalence of multiple powerful groups and strong men, struggling for their share of the so-called national cake at the expense of the much needed Nigeria's economic development) and Dutch disease (i.e. the obvious relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector) (d) Reforms in the banking, petroleum, public sectors etc worsened by the irrational and inhuman responses to these reforms by some employers of labour.

Under this circumstance the capacity of the Nigerian worker to demand the new minimum wage is greatly impaired.

Unfriendly posture of some state governors on minimum wage

It is no longer news that some state governors have voiced their unwillingness to pay the new minimum wage. This is not new. For instance, when the 2000 minimum wage was announced, many state governments refused to pay the Federal Government-recommended minimum wage, leading to many industrial actions. As a recap of what happened in 2000, permit me to present the report of the International Committee of the Fourth International (ICFI) on the strikes by labour and actions of state governors in 2000:

The utterances and comments of some state governors since the Justice Alfa Belgore Committee submitted its report on the new minimum wage of N18,000 is not substantially different from what we heard in 2000 and is to say the least worrisome.

This kind of comments coming from some state governors is very disturbing, especially when we consider that the state governments were consulted and represented in the Justice Alfa Belgore Tripartite Committee on National Minimum Wage Committee and the different state governments made recommendations on what should be the new national wage, with Abia State, providing the highest proposal of N46,700 while Plateau and Ebonyi States made the lowest recommendation of N10,000.

From the foregoing, it is evident that there is an urgent and immediate need for the Federal Government of Nigeria to intensify dialogue with social partners such as the Nigeria Labour Congress (NLC), Trade Union Congress of Nigeria (TUC), Nigerian Employers Consultative Association (NECA) and the Governors' Forum to agree on broad guidelines for the implementation of the new wage in the various sectors of the economy and three tiers of the government.

The president on his Facebook, once assured: 'While I cannot dictate to the state governments or the private sector, I will do everything within my powers to encourage and cooperate with the states to do what is right for Nigerian workers because in the final analysis, we are first and foremost citizens of Nigeria before our indigeneship of a given state. As for the private sector, they can even pay more so long as our vision of growing the economy in partnership with them remains on course. I am very hopeful.'

Labour's hope that the president would do everything within his power to ensure a seamless implementation of the new minimum wage across all sectors and all tiers of government as this would save the country from the wave of industrial actions similar (if not greater) to the ones that heralded the faulty implementation of the 2000 Minimum Wage.

Non-unionised workers, casualisation and contract staff

Non-unionised workers' experience has shown are the greatest victims of unfair labour practices, including the denial of their rights as contained in the extant labour laws and the ILO conventions. Empirical evidence confirms that the respect for workers' right and dignity is very much likely to be violated for non-unionised workers, casual workers and contract staff. This is quite understandable and that is why the constitution, extant labour laws, African Charter on Human and People Rights (Ratification and Enforcement Act) 1990 as well as various ILO conventions seeks to guarantee the right of workers to join a trade union for their protection.

It is unlawful for an employment contract to require or to restrain an employee from joining a trade union. In the same fashion, employees' contracts cannot be extinguished by reason of the employee joining a Trade Union. All workers, whether they are permanent staff, agency or contract staff of any category, have the right to join a trade union and bargain collectively. This is a constitutional right as well as a right under the ILO Convention.

Trade unions must intensify their efforts at unionising the workers as a minimum. They must, however, go beyond that and continue to display courage and solidarity in the protection of the rights and welfare of their members and in the mobilisation of Nigerians against unpopular/obnoxious government policies/programmes. This is their sacred duty and divine calling and is the basis upon which they will be judged by humanity. No amount of fear, evil and oppression can kill the will and determination of any people in their pursuit for social justice and a fair society; except if the people themselves are not determined and united in their struggle. Let me also say that no society has made any fundamental progress without the sacrifice of great men and women, who refused to take the easy part of pretending to be neutral in the midst of evil but rather chose to fight evil, injustice, corruption and oppression head-on.

History is replete with so many examples and even Nigeria's political independence would not have taken place in 1960 without the sacrifice of Nigerian workers, who were massacred at Iva Valley Coal Mines, bulleted at Burutu, bludgeoned and buffeted in many other parts of the country as they fought for the untrammeled freedom and prosperity of their fatherland. The exemplary leadership and unparalleled tenacity of purpose of Chief Milton Dabibi (former Secretary-General of TUC and former General- Secretary of PENGASSAN, Chief Frank Kokori (former General Secretary of NUPENG), and many other great union leaders in the face of intimidating circumstances and unrestrained exhibition of awesome instruments of terror during the dark days of military dictatorship, the present democracy might not have come when it came or might even have eluded us. These great leaders have played their own roles and very well. It is the duty of the current trade union leaders to ensure that Nigeria is liberated from the shackles of corruption, deceit, electoral fraud, social injustice, outright brigandage and voracity effects. We cannot close our eyes to the unprecedented level of suffering, pain and injustice in Nigeria occasioned largely due to the bondage imposed on our country men and women through the instrumentality of corruption, deceit, electoral fraud, social injustice, outright brigandage and voracity effects.

Enforcement capacity of the Federal Government agencies

There are doubts in some quarters as to whether the Federal Government has sufficient qualified personnel for the purpose of ensuring that the provisions of the labour laws, including the National Minimum Wage, are effectively and adequately observed by employers of labour, including the various state and local governments. Even the International Labour Organisation (ILO) seems to be of this view going by their observations that 'unfortunately, in many countries, labour inspection services are understaffed and penalties are too weak. As a result, minimum wages too often remain a 'paper tiger' rather than an effective policy.'

A very close examination of the number of officers working in the Federal Ministry of Labour and Productivity in say Port Harcourt vis-à-vis the level of industrial activities in Rivers State tend to support this line of thinking. As observed by Squire and Suthiwart-Naueput (1997). 'It is well appreciated that compliance is a function of the probability of firms being visited by labour inspection services, and of the level of penalties in the case of non-compliance. There is, therefore, no gainsaying that supervision  by the ministry is very important so as to ensure that the minimum wage is actually implemented in practice.

Organisations with culture of unfair labour practice and miserable wages

It is very sad to say that there are some organisations that have a culture of unfair labour practices and it would seem that they try to exploit every available opportunity to oppress, repress and enslave their workers. One does not need any soothsayer to know that such organisations would do everything possible to evade the new minimum wage. Some of them may even begin to convert their employees (If they have not already done so by now) to 'contract staff' to surrogate employers such that none of these employers would have up to 509 employees since the minimum wage applies to companies with at least 50 employees. They would then turn around and say that the workers are not their employees and that even their 'employers' have informed them that they have less than 50 workers and hence the minimum wage does not apply to them. Let me point it out clearly that the organised labour would not accept any such unfair labour practices and would vehemently oppose it. For the purpose of minimum wage implementation, all workers working in the company/organisation irrespective of their classification or nature of contract would be considered.

Social dialogue and consultative meetings among stakeholders

The importance of social dialogue and consultation among the stakeholders in the effective management of the new minimum wage cannot be over-emphasised. This has also been confirmed by the ILO in her update on minimum wage developments where it was observed that:

'The active involvement of social partners in both the design and operation of minimum wage enforcement regimes is essential to enhance their impact. Recently, in the United Kingdom, in the face of growing problems of underpayment of minimum wages, the government organised consultative meetings with interested parties to discuss the suitability and implications of suggested changes to the minimum wage enforcement regime. Both workers' and employers' organisations put forward a number of constructive proposals. In the United States, the US Government Accounting Office (GAO) recommended to the Department of Labour to involve employers' and workers' organisations in planning their enforcement activities so as to counter the decline in the number of actions to enforce the Fair Labour Standards Act between 1997 and 2007.'

Based on the foregoing, it is important that Nigeria as a nation should apply international best practices on similar issues, which include effective dialogue and consultation by the stakeholders, for the purpose of achieving a seamless implementation and better management of the new minimum wage in the interest of industrial peace and harmony and our post-recession economy. This was also the view of the Justice Alfa Belgore Tripartite Committee on National Minimum Wage which suggested that:

'In order to forestall any possible industrial crises that might arise as a result of the new national minimum wage, the Federal Government, through the Federal Ministry of Labour and Productivity, as a matter of expediency convene a meeting of the social partners (NLC, TUC and NECA) to agree on the broad guidelines for the implementation of the new national minimum wage in the various sectors of the economy, including the public service'.

Proper enforcement mechanism to discourage non-compliance

Without adequate mechanism for its enforcement, the new minimum wages would just end up as a mere paper work, without any practical use. Therefore, the minimum wage should be accompanied by credible enforcement mechanisms, which should have proper legal backing. Evidence from a number of country studies suggests that non-compliance can be extremely high, especially in countries where the sanctions for non-compliance are minimal.

Based on the above and the history of non-compliance in Nigeria, the Trade Union Congress of Nigeria (TUC) support the recommendation of the Justice Belgore-led tripartite committee on new national minimum wage, calling for effective sanctions against erring states and organisations. For instance, the committee recommended that Section 8 of the Principal Act (1981 National Minimum Wage Act), which prescribes a fine not exceeding N500 or imprisonment for a term not exceeding three months or both, should be amended to 'a fine not exceeding N100,000 or to imprisonment for a term not exceeding six months or both such fine and imprisonment.' The committee also recommended for the amendment of Section 3 of the Principal Act which prescribes 'a fine not exceeding N100 and in the case of a continuing offence a fine not exceeding N10 for each day during which the offence continues,' to read instead, 'a fine not exceeding N50,000 and in the case of continuing offence to a fine not exceeding N10,000 for each day during which the offence continues.' These in our view will discourage non-compliance by organisations and have our total support.

Adequate publicity of the new minimum wage
There must be adequate arrangements to give proper publicity to the new minimum wage provisions as well as the provisions of the minimum wage law in languages or dialects understood by workers including illiterate persons. The importance of publicity and mass enlightenment of the new minimum wage cannot be over-emphasised.

Effective compliance monitoring
It is very important for the Federal Government to adequately staff their various agencies charged with responsibilities of monitoring compliance with the new minimum wage as well as provide them with adequate facilities necessary to carry out their duties. The organised labour (i.e. the Nigeria Labour Congress and the Trade Union Congress) should also inaugurate their working committees for the monitoring and enforcement of the new minimum wage across the country. The NLC and TUC monitoring committees when formed should ensure that they work in  close partnership with organised private sector and NECA. They should also ensure that the new minimum wage is seamlessly implemented.

Conclusion
The effective management and implementation of the new minimum wage require the efforts, commitment and collaboration of all stakeholders. Even as labour must ensure that comments and suggestions on the effective implementation and management of the new minimum wage receive the attention of policy makers.

•Hyginus Chika Onuegbu is the State Chairman, Trade Union Congress of Nigeria (TUC), Rivers State Council.