In Support of National Minimum Wage

The organized labor is in a tangle with legislators over a pending bill to remove labor relations, particularly, minimum wage from the Executive Legislative List of the Constitution and put it on the Concurrent List. This will make it illegitimate for the federal government to impose a national minimum wage on states that are incapable or willingto pay same. This proposed legislation rides on concerns about federalism and the need for component states of the federation to be freed from constitutional centralization. Expectedly, organized labor is not taken in by argument of decentralization and federalism. It stormed the National Assembly Complex some days ago and demanded the end to the bill that has passed second reading. Labor leaders rightly reads the possibility of successful passage of the bill that could easily rollback the strategic gains they have made in collective bargaining with a government that has serially betrayed labor.

Even though labor has been largely remis since 2015, this time around we need to rally round labor and ensure the bill does not become law. This is because the bill has adverse social and economic impacts that far outweigh its positive governance benefits. A simple cost-benefit analysis fails to recommend its passage for the reason that this is time to drive up social and economic wellbeing of ordinary Nigerians through strong labor protection rather than spiral down to more poverty and misery through whittling down entitlements. If there is anything the management of the COVID19 pandemic has revealed, it is that government can do a lot of good to the economy by putting money in the hands of ordinary people. The pandemic has spelled an end to Reaganomics and the misbegotten mantra of ‘government is the problem not the solution’. All over the world, government is hailed as the solution as it rebuilds institutions for sustainable growth and human prosperity.

It is worrisome that many Nigeriansare not paying sufficient attention to this bill. The reactions have been rather superficial and partisan. Many see the bill either as another legislative effort to restructure a country whose incoherent constitutional order is a major restraint to prosperity and stability and an enabler of executive despotism; and others see it as a self-serving initiative. The Director General of the Progressive Governors Forum (association of Governors elected under the platform of the APC) took labor leaders to the cleaners for daring to obstruct legislators in the exercise of their constitutional responsibilities. In his view, federalism requires that the federal government should not burden poor states with financial burdens that they cannot carry. It helps democracy if states exercise their legislative competence to cater for social and economic issues that they select and can manage.

All these are true and important. We cannot emphasize enough the importance of making states both viable and responsive. The president of the Africa Financial Corporation and Nigeria’s former minister of agriculture, Professor Adesina, in a recent speech, called for a United States of Nigeria, where development actually happens in and through viable and competent states. So, anything to make state shape up and own their game should be supported.

This is true. But the bill pending before the National Assembly does more than that. It has the potential to further destroy the institutional support for social and economic wellbeing in Nigeria in a period that the current pandemic has further immiserated millions of Nigerians. If the bill passes and is accented by President Buhari it will pave way to a race to the bottom where many states will further reduce their state minimum wages to very ridiculous levels on the excuse of dire financial constraints.

Let us consider the bill in some details. The bill’s logic is to give states the legislative competence to manage minimum wage. This is straightforward. States are major employers of labor. States are also subnational governments that have constitutional right to receive dedicated revenue from the federation revenue fund. It is not a stretch to require state legislatures and the executives to bear responsibility for determining what should be the minimum wage in their territories. Some could argue that giving states this responsibility will strengthen local democracy and entrench accountability at the subnational level. The latter point is important in the context of what seems like a total collapse of democratic accountability at the states. So, the logic goes thus: get the states busy so they can manage theirmess. This is how they become governments not just receptacles of federation allocations.

The legality of the bill itself is also assured. The constitution has assigned the national and state legislatures the responsibility of changing it. If two-thirds of members of both chambers of the National Assembly vote to approve the translation of minimum wage from Exclusive Legislative List to Concurrent Legislative List and a two-third of Nigeria’s state legislatures agrees to that proposal, then the constitution is changed. The constitution introduced this rigorous process of amendment to ensure that political convenience will not be a basis of changing the fundamental terms of social cooperation. Like the US founding fathers in the articulation of The Federalist Papers, Nigerian constitutional makers know that special interest and cliques easily develop in politics and could steamroller through the federal legislature. Such occurrence will not be much harmful if we can still secure the constitutional order of the republic through other counter-majoritarian and anti-majoritarian devices. One of such devices is to require that before you change legislativelistyou need the approval of more than 2/3 of state legislatures.

In the context of the overwhelming control of state legislatures by the state governors this bill will easily pass through enough state legislatures in spite of any resistance by labor. The state legislatures across Nigeria have become echo chambers of the governors and as long as the governors are motivated to scorch to death the federalization of minimum wage the bill will easily pass. All those who do not want to see the bill become law have to intensify opposition at the National Assembly where there is a history of the sort of deliberation required of a legislative assembly. Thankfully, the bill is not an executive bill. Senator Lawal and the leadership of the National Assembly would not be looking across their shouldersafraid of a presidential whipping.

But why should killing the bill be a national priority? It is for the reason that removing a national minimum wage and allowing statesto go below the federal minimum wage will worsen the crisis of poverty. In spite of religious and political fundamentalism and widespread collapse of good governance across Nigeria, a main factor driving insecurity in Nigeria is pervasive and extreme poverty. Nigeria’s poverty is scandalous and increasing. Everyday we are adding more people to the poverty bracket than any other country in the world, including Ethiopia. A look at the World Poverty Clock shows that Nigeria will probably have more than half of its estimated 200million citizensextremely poor by 2023. This could be worse if the COVID19 containment measures fail or the insecurity in the northeast and the rest of country continues.

The president vows to take out 10 million people out of poverty bracket every year. This is probably a joke. If it is not, then he has to weigh in on the proposed bill. The neoliberal fantasy that insignificant cash transfers to insignificant number of Nigerians and stimulus to corporate Nigeria will drive away mass poverty is just ideological fancy. We know clearly from the history of the rest of the world that a good tide does not lift every boat. What lift stranded or submerged boats are efficient redistributive policies that actually provide sustained income for the poor. A good minimum wage is often alleged to lead to underemployment as firms responds to increase production costs by hiring less. But that is why government has to try and provide wage support stimulus. We should prioritize earnings, especially in the public sector, as a country responsibly engaged in neo-Keynesian expansion of aggregate consumption during the pandemic.

The notion that we can grow the economy sustainably and improve general wellbeing without ensuring more and more citizens live about poverty level is a tragic joke. It is not the market that lifts million out of poverty. It is the visible hand of government providing protecting to the vulnerable and steadily but smartly nudging private and public actors towards allocative and dynamic efficiency. The lesson is becoming clear. The public sector is not the problem. The public sector is the solution. Yes, the public sector needs to be smarter. But the lie that somehow, we would get to economic wellbeing by allowing the livelihood of the people to be determined by the rationality of the market has now been uncovered. From Germany to US to China, governments are spending themselves out of global recession and defending earnings from the buffeting of cold economic waves.

The legislators should discountenance the logic of allowing state governments to determine their minimum wages without a national benchmark. On paper it looks neat. But in reality, it is bad economics and bad national security consideration. We can experiment true federalism with other non-strategic agenda. We can allow states manage their resources and pay royalty to the federation account. We can help state improve their internally generated revenue through corporative federalism. But in the meantime, we have to set a benchmark for them on livelihood protection. The federal government should consider it strategic national security to insist, and provide incentives, for states to fix their minimum wages above not below the national benchmark.

It is true that many states are poor and broke in Nigeria. But they will be actually poorer and more broken if they are allowed to further lower the minimum wage. Such poor states need to be helped to improve earnings not to reduce them. Consider this scenario. This bill passes and Yobe fixes its minimum wage at N15,000. A Chinese company locates to Yobe and pays its workers N16,000. This will be legal. The result will be further to deepen poverty in Yobe. The domino effect will be to contract consumption in Yobe; worsen economic production, increase criminality, and deepen poverty and miseries. A vicious circle reinforced by a dangerously low state minimum wage.

Poor Yobe has many areas to reduce cost of government. It starts from not having mansions in Abuja; its governor and top officials not driving in large entourages and not equalizing salaries of political appointees. Yobe legislators should not earn as much as Lagos legislators. Lagos civil servants should also earn more than Yobe civil servants. But both should not earn less than the minimum wage. That should be the threshold to protect against extreme poverty. There is no economic or political sense in which it is in public interest to ask Yobe to pay below a rather low national minimum wage. That will be a race to deathly bottom. The essence of federalizing the minimum wage is to avoid that race.