ISSN: 0184-7937

 

 

 

ISSUES IN NATIONAL MINIMUM WAGE FIXING AND THE INSTABILITY IN NIGERIA’S INDUSTRIAL RELATIONS

 

Onyeche, Chinwendu*1 and Nse-Abasi Edighienyong Edet1

 

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1Department of Sociology and Anthropology, Faculty of Social Sciences, University of Uyo-Uyo,

Akwa Ibom state, Nigeria. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.; This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

 

ABSTRACT

Issues in National Minimum Wage fixing which predate Nigeria political independence has caused very serious controversy and debate in the country thereby challenging the nature and structure of Nigeria industrial relations system. By adopting a theoretical approach of analysis, the study concludes that, government must develop an acceptable and good wage review policy at the expiration of existing agreement, especially when there is a rising price of commodities in the market without correspondent increase in the wages of workers. In view of the above, the study made some policy recommendations prominent among them are that, individual states should be allowed to pay their workers minimum wage based on their financial strength and the subsisting cost of living or living wage; the government should ensure they monitor organizations with culture of unfair labour practice and low wages; there is also the need for government to reduce the cost of governance and improve the living standard of workers by fixing a better wage. Finally, diversifying the Nigeria economy is necessary for states to enhance their internally generated revenue and step into creation of employment opportunities and better pay package.


 


INTRODUCTION

In most countries of the world, it is the responsibility of the government to carter for the wellbeing of its citizens. Even in the capitalist states, governments still have a role to play towards the welfare of the workers, apart from maintenance of law and order. For instance, more than 90 percent of all countries have some kinds of minimum wage legislation.  According to Onuegbu (2010) define Minimum Wage as the rate of pay fixed either by a collective bargaining agreement or by governmental enactment as the lowest wage payable to specified categories of employees. ILO (1967) in its earlier meeting of experts on Minimum Wage fixing and industrial related issues had explained that the concept of Minimum Wage contains three basic ideas:  The first idea is that, Minimum Wage is a wage considered sufficient to satisfy the vital necessities of food, clothing, housing, education and recreation of the workers, taking into account the present economic and cultural development of each country. The second idea is that, Minimum Wage represents the lowest level of remuneration permitted, in law or fact, notwithstanding the method of remuneration or the qualification of the worker. Thirdly, Minimum Wage is the wage which each country has the force of law to uphold and which is enforceable under threat of penal or other appropriate sanctions. Above all, Minimum wage is a significant initiative in addressing the right to human dignity at the workplace. Though, the practice of National Minimum Wage is not new, the duration, details and nature vary from country to country.

Consequently,  Adesina (2002) notes that one of the means through which government  improved living conditions of its citizens is through introduction of national minimum wage legislation, and the mechanism for reviewing it when necessary. This is to prevent the exploitation of workers by their employers; Nigeria therefore is not an exception.

            In the past decades, the federal government of Nigeria has pursued series of policies geared towards rapid socio-economic transformation and improved standard of living of the Nigerian populace. In the third national development plan 1975-80 for example, the government formulated a development policy, which was designed to achieve among others, the following objectives: The promotion of employment and productivity; the maintenance of reasonable price stability, and equitable income distribution between sectors of the economy. It was the believe of the government that the attainment of these objectives would lead to economic growth and development, raise the standard of living, promote, and sustain industrial peace and harmony (FRN, 1986).

During the 1990s, the government economic policy measures were designed to improve the living standard of Nigerian through series of measures. However, this measure includes the introduction and implementation of Structural Adjustment Programme (SAP), the moderation of inflation rate, strengthening of the external sector performance and achieving a high national output growth. Other measures included the promotion of self-employment through the establishment of National Directorate of Employment (NDE), the Family Support Programme (FSP), and the Family Economic Advancement Programme (FEAP). The overall objectives of these policy measures put in place were to raise the standard of living and reduction of income inequalities amidst the populace.

On May 29th, 1999, a democratically elected government was sworn in the country, thus ushering the third civilian government of the federal republic of Nigeria. Like the previous regimes in the country, the government set for itself a major goal of improves standard living for all Nigerian. To make this a reality, government introduced some policy measures. These include, among others, the Poverty Alleviation Programme, the introduction of Universal Basic Education (UBE), improvement in industrial and domestic output through increased and effective production, and the fixing of minimum wage.

Meanwhile, of all the policy measures of then civilian administration to remove the dehumanizing treatment of workers in Nigeria, none has generated controversy and industrial instability except the   minimum wage fixing.  The spate of industrial instability, leading to strikes and stoppage of work cut across the public servants at the state and local government in many parts of the federation. Fapohunda, Atiku and Olanrewaji (2012) argues that developing countries too, have regularly increased their minimum wage to provide social protection to vulnerable and non-organized categories of workers. In China for example, it was introduced in 2004 to address wage inequality while it was also introduced in South Africa in 2002.  Countries like Brazil, Argentina and China have been among the main drivers of this upward trend. But in Nigeria, issues relating to wage negotiation and increment dates back to the period of colonial rule and are associated with the civil service reform programmes when government enacted various labour laws seeking to regulate labour relations and promote the welfare of workers (Fajana, 1994; Karimo and Major, 2017; Odubola  and Adeyemi, 2017).

The federal government has always set up ad-hoc commissions to consider bonuses or wage revisions during period of labour discontent. In Nigeria, collective bargaining never played any significant role in the fixing of wage and labour relations especially in the public sector. It is observed that government influence has affected the practice of collective bargaining negatively through its control of labour unions (Fapohunda et al., 2012). The Nigeria industrial landscape was greatly affected as a number of labour laws, decrees and regulations were put in place by the military. The instability of Nigeria’s industrial relations system gave birth to quite a number of labour laws and amendments from Trade Union Act of 1973 to the Trade Disputes (Amendment) Decree of 1988 even the most recent National Minimum Wage (Amendment) Act 2011.  The issues of the minimum wage have been the focus of not only the tripartite bodies of the industrial relations scene, but also of many management writers and industrial sociologists. The effect of the euphoria of the issues has had such a tremendous impact on the operation and functioning of civil service at the federal, state, and local government levels that it warrants an extensive and intensive study. An approach must be adopted to reduce the incidents of strikes which emanate from minimum wage fixing or determination. This paper attempts to make some contributions along this line.

1.     Historical Overview of Development of Minimum Wage Fixing/Determination

The history of minimum wage fixing or determination could be dated to the 19th century in New Zealand and Australia. According to Starr (1981), the minimum wage was first introduced in these countries as one of the ways for the prevention and settlement of industrial disputes. Under the New Zealand industrial Conciliation and Arbitration Act  of 1894, the court of Arbitration was empowered to settle industrial disputes by issuing awards, fixing minimum wages that could be made binding for all workers in the industry in the district where the dispute had taken place. It was from this experience that the system of fixing wages through arbitration awards spread to a number of Australian jurisdictions.

The International Labour Organisation (1970) in a survey report submitted that it was from New Zealand and Australia that other countries adopted ideas of minimum wage fixing as a measure of preventing unduly low wages of certain categories of workers which were considered vulnerable to abuse. According to the ILO report, minimum wage fixing infiltrated into continental Europe about the beginning of the 20th century with France (1915), Norway (1918) Austria (1918) Germany (1923), Spain (1926) and Belgium (1938) adopting the system respectively. The ILO survey studies (1971) reported that it was during the 1940s and 1950s that effective laws and a number of minimum wage fixing regulations were implemented on a significant scale in most countries of the world. During the colonial era, the system of minimum wage fixing was extended to the colonies. In the British colonial countries, for example, the ILO report also observed that the minimum wage regulations followed, for the most part, the pattern of the Trade Board Act of 1918, and the Wage Council Act of 1945 of the United Kingdom. After independence, most former colonies continued with the system of minimum wage fixing through legislation rather than by collective bargaining. It is therefore not surprising that till the present day, minimum wage fixing is usually established through legislative authorities in some countries of the world.

1.1       The Nigerian Experience

The first attempt at fixing a national minimum wage in Nigeria were made in October 1954 when the former Western Regional Government proposed to supplement the wages of unestablished workers under its employment so that no employee would receive less than five (5) shilling (50 kobo) per day for a 44-hour week work. The Western Regional Government then extended the invitation to the Federal Government to pay this minimum wage to her (FGN) employees who were then resident in the Western Regional Territory. As a result of this, Federal Government deemed it necessary to set up a committee to study the suggestion of the Western Regional Government. The committee rejected this suggestion on the ground that the minimum wage fixing by the Western Regional Government was not based on any systematic principle and method, and again such measure was likely to bring adverse consequences on employment, prices, productivity and income. It could also lead to national industrial strike, as employees in other sectors would demand for minimum wage. Immediately, the Federal Government upheld the submission of the committee.  

Fashoyin (1992) explain that prior to the initial attempt at fixing a national minimum wage by the former Western Regional Government, responsibility for regulating and adjusting periodically the wages of the least paid workers as distinct from sweated labour which had always been regulated in the affected industries, rested upon the provincial wages committee established in 1937. The author pointed out that requests had earlier been made in 1949 by the Government of Eastern Region under the control of NCNC (National Council of Nigeria and Cameroons) for a daily minimum wage of five (5) shillings for salaried workers in Nigeria. This attempt however failed to achieve the desired result.  

The Federal Government of Nigeria from time to time set up series of commissions to study productivity, wages and prices in Nigeria with a view to determining, fixing, and recommending appropriate wages to be paid to workers (see Table 1 for details). Before the nation’s independence and after it, these wages commissions and civil service reforms were used to study productivity, prices and income.

 

Table 1: A Summary of Civil Service Reforms and Wage Commissions in Nigeria, 1934-2012

Commissions

Year

Hunts Commission

1934

Bridges Committee of Enquiry

1941

Tudor Davies Commission

1945

Harragin Commission

1946

Miller Commission

1947

Hansbury-Gorsuch Commission

1954/1955

Newns Commission ( the Elwood Grading Team)

1956

Mbanefo Commission

1959

Morgan Commission

1963

Elwood Commission

1966

Adebo Commission

1970/1971

Udoji Commission

1972

The Cookey Commission

1980/1981

Dotun Philips Panel

1985

The Fatai Williams Commission

1990

The Ayida Panel Review

1994

The Philips Asiodu Committee

1998/1999

Ernest Shonekan Committee

2000

Justice Alfa Belgore Committee

2009/2010

Source: Onuegbu (2010).

Fashoyin (1992) further reported that the first initial and official step at evolving a uniform minimum wage was by the Morgan commission of inquiry in 1963. This commission required to examine the need for the introduction of a national minimum wage, and to make recommendations. The commission after series of deliberations proposed that a minimum wage should be fixed which would be adequate to cater for a worker and his family.  The Adebo Wages and Salaries Review Commission of 1970 were unique in being the first statutory body empowered to review wages at all levels across a variety of government bodies. The commission subscribed to the Morgan Commission’s view on the living wage, which should be sufficient to assure a worker and his family a fair living. The commission therefore recommended an enforceable national minimum wage in the country along a three zonal basis.

According to Aina (1992) the Udoji Salary and Wages Commission perhaps made the greatest impact on the public service. The term of reference of the commission was not only to review salaries and wages, but also study how the nation could improve or increase the efficiency and the effectiveness of the existing manpower in the public service, so as to meet the challenges of a development oriented society. In its main report, the commission recommended staggered increases in the minimum wage from an annual ₦312 to ₦630 initially and eventually to ₦720 in the second phase of implementation. The minimum wage was intended to apply only to the public sector, but the salary awards were extended to the private sector following spate of industrial disputes.

During the civilian regime of president Shehu Shagari, 1979-1983, Nigeria also experienced a development on the minimum wage issue. In the budget speech of December 1980, the president announced an increase in the minimum wage to ₦100 per month for public servants. This amount was announced to close up the era of wage freeze, and to declare a return to free collective bargaining. Eventually, a joint session of the National Assembly, agreed on a monthly national minimum wage of ₦125 per month. This was confirmed and sealed by the National Minimum Wage Act of 1981, which provide for ₦125 monthly wage as basic minimum, which cannot be set aside by any agreement whatsoever. Another development in the minimum wage fixing was in August 1998. The then head of state, General Abdul Salami Abukakar smarting from the euphoric acclamation that ushered in his government, announced a national minimum wage of ₦5, 200 for all public sector workers in the country.  Although this was later slashed to ₦3, 500 per month for federal workers, and ₦3,000 for their state and local government counterparts, the nation’s industrial relations terrain has remained turbulent for both the government and the workers since the pronouncement in 1998.

On 29th May 1999, a democratically elected civilian government was established in Nigeria. One of the cardinal objectives of the new government is Poverty Alleviation through improved purchasing power of the populace. In order to actualize this programme, the then president of the Federal Republic of Nigeria, Chief Olusegun Obasanjo, in his address to the Nigerian workers on May 1st, 2000, announce a dual new minimum wage, to pay ₦7, 500 to all Federal Public Sector including oil producing states, and ₦5, 500 to all other states and local government counterparts in the country, but this was rejected by NLC. So, in the same 2000, the Act was amended and the national minimum wage was reviewed upwards for states at ₦6, 500 per month while that of federal workers remained at ₦7, 500 per month (National Minimum Wage (Amended) Act, 2000; Arizona-Ogwu, 2007). For a summary of civil service reforms and wage commissions in Nigeria see Table 1 below.   

It was not until 2010/2011 under President Goodluck Jonathan’s administration that the issue of national minimum wage was put on the front burner of national politics. After excessive negotiations and bargaining, the National Assembly enacted a new National Minimum Wage Act which was signed into law by the President in May 2011 at ₦18, 000 Naira per month for workers of all tiers of government including private sector. As noted by Akunnakwe (2011), on the 23rd day of February, 2011, the senate of the Federal Republic of Nigeria approved eighteen thousand Naira (₦18,000) as the minimum wage for the Nigerian workers. The bill which was given an expeditious passage by the upper chamber increased the minimum wage from ₦7, 500 to ₦18, 500 (US $118, 00).

The section 2 (1) of the National Minimum Wage Act of 2011 states that: from the commencement of this Act, it shall be the duty of every employers to pay a wage not less than the national minimum of ₦18,000 Naira per month to every worker under his establishment (National Minimum Wage (Amended) Act, 2011). Thus, the Act abolished the dual minimum wage of Abubakar Regime (1998-1999) and re-introduced the same minimum wage for all the tiers of government in Nigeria.

2.  Industrial Instability and National Minimum Wage Agitations

A situation of conflict in industrial relations system is mostly refers to a situation of instability. Essentially, two categories of conflicts in industrial relations are worth mentioning. These are conflicts of interest and conflicts over right. Conflicts of interest relate to issues of bargaining and collective agreement and conditions of work, while the rights conflict concern those which involve alleged isolation of rights already existing in the collective agreement or contract of employment (Akapala, 1982). But other overt expressions of industrial instability include, strike, lock-out, go-slow, overtime ban, work-to-rule, refusal to participate in joint negotiating committee etc.

Obijifor (2011) has observed that industrial relations instability has gripped the nation for weeks, days, and months over non- fixing or non-payment of the National Minimum Wage and that the suspension of the strikes by the workers can only be described as a temporary solution to a continuing problem. Nigeria industrial system has recorded a lot of man-day lost over the years and national minimum wage fixing is the cause of it most times. The instability between the federal/state governments on one hand and labour representatives showed that when the minimum wage is negotiated, most often signed, one significant issue was over looked (Obijiofor, 2011). The parties in the dispute took their eyes off the ball of fine details in the agreement which has now led to the debate about the category of workers that should receive the minimum wage and when payment of the wage should commence, as a result of this, there is likelihood of industrial instability in the country (Adebisi, 1999).

3.        The 1999 Constitution of Federal Republic of Nigeria and the National Minimum Wage Fixing

Under the 1999 constitution of Federal Republic of Nigeria second schedule part 11, labour and minimum wage are within the exclusive legislative list (FRN, 1999). This means that federal government legislates upon the minimum wage for both state and local government. The implication of this is that once, the federal government set the minimum wage for the federation in its legislation, the state government cannot legislate any minimum wage below it.

The Nigerian Labour Congress (NLC) claimed that the figure, ₦18,000 was arrived at after two years of grueling and very strenuous negotiations between the tripartite social partners which included the federal government, state governments, employers’ associations represented by Nigeria Employers Consultative Assembly (NECA), Manufacturers Association of Nigeria (MAN), Nigeria Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA) and the workers represented by the NLC and Trade Union Congress (TUC). According to the NLC in the process of negotiating the minimum wage based on the proposed demand of ₦50,000 by the law movement, the committee benefited from presentations from professionals and experts who took into cognizance all economic and revenue profile in the national economy and all tiers of government. This was measured against the general cost of living and income level in the country and the affordability to pay by all employers covered by law (Ajani and Ndiribe, 2011). If indeed all stakeholders were consulted and participated as NLC claims why then did some state governors made a sudden U-turn by refusing to implement the national minimum wage? Assuming that the state governors agreed with the ₦18,000 Naira without conditions such as re-definition of the basis for Nigerian federalism, resource control, special grants from the federal government, restructuring of revenue sharing formula, etc.

Recently, under the current Buhari administration the state governments are already crying foul over the organize labour request for a new minimum wage of ₦56,000 for Nigeria workers. They claim they cannot afford to pay the new minimum wage. This should not come as a surprise to us, knowing full well that some are owing their workers more than one month salary. How then will it be possible to pay their workers the new propose minimum wage which is more than 100 percent increase on the old rate? Ogunna (1999) posits that of all the criteria for wage and salary fixing, the ability to pay are the most crucial as no organization can pay beyond its financial ability. It considers more ability to pay than any other criteria and fixes workers’ wages at a rate or level it can pay.

4.        Emerging Issues on the National Minimum Wage Fixing

After a careful study and understanding of the bargaining for equitable income distribution in Nigeria seems to be dominated by active government actions. The principle of collective bargaining as defined appears to have limited application in the actual bargaining process simply because collective bargaining is the crucial tool of wage negotiation involving a democratic approach towards conflicting issues. However, it has been pointed out that whereas the federal government accepted the principle of collective bargaining for determining productivity and income, often, the same federal government has resorted to statutory fixing of minimum wage. In fact, by failing to fix the wages of its own employees through negotiation on voluntary principle with the concern unions, the government more often had precluded the operation of effective collective bargaining in Nigerian industrial relations system.

It is also observed that the level of consultation of government with the employers and unions in formulating income policy is at low ebb or non-existent. In passing the minimum wage bill into law for example, some employers both in the private and public sectors of the economy claimed complete ignorance of government’s plan on the issue. Most private sector employers avoided implementation for reasons of financial inability. The Federal government confirmed that it has increased the statutory allocation to states and local governments, therefore the issue of implementation of the new minimum wage should not be a problem to governments at all levels. It is to be mentioned that statutory allocation in Nigeria is one of the most deceived and politicized issues in the country. In many instances, there have been many executive tampering and illegal manipulations of figures with the allocation formula leading to the irregularity and uncertainty of payment of statutory allocations to both the states and local governments. Relying solely on statutory allocation for the payment of salaries and wages at both the state and local government is dangerous.

Nonetheless, the minimum wage implementation places greater pressure on key private sector employers. This is because the organized private sector is proactive on the issue of review of the remuneration of their workers in order to avoid industrial unrest. The review is often based on a number of factors, of which the performance of the sector and ability to pay are critical. Fixing minimum wage by statutory bill and attempt by the private sector to implement the directive would distort existing negotiated salary structures in the industrial sector. Perhaps the major negative challenges of minimum wage fixing and implementation are job losses and    rationalization in both public and private sectors.

5.      Conclusion and Policy Recommendations

Government must develop an acceptable and good wage review policy at the expiration of existing agreement, especially when there is a rising price of commodities in the market without a correspondent increase in the wages of workers (the value of workers salary begins to dwindle). Since rule making and power sharing form major ingredients of industrial relations, a stable wage bargaining structure must be applied at the policy development stage. General principles would subsequently guide wage fixing and salaries through a democratic collective bargaining, while the federal government responsibility to fix equitable minimum wage periodically is highly laudable, input in the decision process from all necessary interested parties would facilitate implementation and contain conflict in the workplace.

For government to succeed in national minimum wage issue, the following recommendations must be adhere to:

1.      Individual states should be allowed to pay their workers minimum wage based on their financial strength and the subsisting cost of living or living wage. The variation in revenue profile of states in Nigeria is undermining their respective ability to pay minimum wage. Therefore, Federal government overriding role in wage fixing and labour related matters without giving primacy to the economic considerations of states amount to an exercise in futility.

2.      Government should ensure they monitor organizations with culture of unfair labour practice and low wages. Unfortunately, some organizations have very bad culture of unfair labour practice and exploit every available opportunity to oppress, repress, and even make minimum wage bill not to be passed into law in other to enslave workers. Such organizations convert their workers to contract or casual staff so that none of their staff working strength would be up to 50 workers since the minimum wage apply to organizations with at least 50 workers.

3.      There is need for Government to reduce the cost of governance and improve the living standard of workers by fixing a better wage, also tackle political corruption necessary for taming or curbing the flamboyant and ostentations lifestyle of political office holders. This must be done so that minimum wage laws will not remain a “paper tiger” but an effective government policy.

                                                                                               

4.      Diversifying the Nigerian economy is necessary for states to enhance their internally generated revenue and step into creation of employment opportunities. The labour market situation has a strong interplay as determinant of wage or compensation. This is as a result of the unprecedented level of unemployment and poverty in the country, period of unemployment do not generally favour high pays as employers have the opportunity to attract high caliber employees without necessarily offering the legal minimum wage which may be considered as adequate or excessive.

 

5.      Federal government should engage sufficient and qualified expert personnel for the purpose of ensuring that the provision of the labour laws and National Minimum Wage Act are effectively and adequately observed during negotiation, because the resultant effect of failure to involve necessary parties cannot be anything less than industrial relations crises. 

 

 

 

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