Increase in minimum wage and its implications for economic stability and workers productivity

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CHAPTER ONE

                                               

INTRODUCTION

 

  1. I BACKGROUNDTO THE PROBLEM

 

The task of maintaining high productivity in an economy undergoing or experiencing arbitrary constant wage review is a Herculean one. The intervening role of the government in performing this Herculean task is crucial, given the fact that the fixing of national minimum wage is a government imposed and directed labour welfare programme, even where there is a seeming appearance of negotiation among stakeholders.

 

In September 1998,the Abdulsalami administration declared a National Minimum Wage of N3, 500.00 per month, aimed at alleviating the sufferings of workers. While some states and parastatals were yet to commence payment due to claims of inability to pay, the Obasanjo administration on May 1st 2000 announced a new National Minimum Wage of N7,500.00 for Federal Civil Servants and N5,500.00 for those of States, a step that threw almost all sectors of the economy into a state of heightened industrial disharmonyldispute between workers and employers of labour as many state governments bluntly refused to be saddled with a huge wage bill without a corresponding asset base. This is usually the pattern that develops with every announcement of wage increase in national minimum wage, and so it is usually met with scepticism on the part of workers. For instance, the civilian government elected in 1979 increased the monthly minimum wage from sixty naira to one hundred naira in 1980, even though the Nigerian Labour Congress demanded three hundred naira. After a partially successful general strike in May 1981, the government conceded another 8125, more than doubling the pre-1980 level (Otobo, 1981; van Hear, 1988). Union reports speak of a sharp reduction in employment in nearly all companies; a few closed down immediately after negotiations on the National Minimum Wage were concluded or threatened to do so (Textile Workers Union Zonal Reports, Lagos, Ogun, Ondo, 1982)’. Others retrenched, with many shedding more than half of their workforce over a period of two to three years. While the reasons were many, the wage hike exacerbated an already problematic situation of low productivity in the Public Sector.

 

 

Productivity is a key indicator of economic progress of an industry in particular and the economy in general. It is generally related to the real income of workers and with the standard of living of the populace. Its measurement therefore is a useful tool in economic forecasting.

 

The major determinants of productivity are quantities and qualities of the resources used: state of technology available’for use; the degree of conduciveness of the work environment to attain the output including the system of rewards to the owners of the resources; the extent to which initiatives and ingenuity are employed or suppressed, as well as the political, social and economic environment. However, labour is generally the largest cost element in many industries, consequently, the approach in such industries is based essentially on output per man-hour measures. The definition of productivity in such cases is narrowed down to real output per hour of work, that is, the effectiveness with which we use the productive resources of labour. Thus an increase in output achieved by raising the output per hour of work does more good than an increase in output achieved by working more hours. This approach that focuses on the productive capacities of individuals is useful, provided the limitations are recognised. This is particularly important in our own

 

..          circumstances in Nigeria. We must recognise the factors which inhibit productivity in our own case because the performance of an individual at work is a function of certain factors, including his knowledge, skills, motivation, attitudes and certain aspects of the environmental situation which in turn include the nature of the job, rewards associated with his performance and the leadership provided for him. All these factors bear upon him, and depending on the direction, they may enhance or inhibit productivity.

 

There is no gainsaying the fact that wages must bear some relationship to productivity; how this relationship affects workers productivity is the crux of this research.

 

 

1.2        STATEMENT OF THE PROBLEM

 

The main purpose of wage increment is to improve workers’ standard of living and to encourage higher productivity through greater commitment to one’s job. Unfortunately, this does not seem to apply to civil servants in Nigeria, as any announcement in wage increment is greeted with groans and sighs as workers now know, from experience, that either inflation will quickly steal the benefits of the wage increase from them or state governments would refuse to pay. Yet workers must earn a decent wage if they must satisfy their basic human needs as highlighted by Abraham Maslow in his hierarchy of human needs.

 

 

The problem now is that available facts show that in spite of improved national minimum wage in the country, the Nigerian Civil Service is stilled dogged by low productivity in practically every sector of the economy. Conversely, the Private Sector seems to have thrived in similar areas considered unprofitable when run by government. Why is this so?

 

 

1.3         OBJECTIVES OF THE STUDY

 

The main thrust of this paper is on the Increase in minimum wage and its implications for economic stability and workers productivity

 

The aims of the study are:

 

  • To find out whether there is any relationship between an increase in the National Minimum Wage and Productivity among the Nigerian Civil Servants
  • To establish other variables that influence productivity; and,
  • To proffer suggestions to improve workers’output or productivity in Public Agencies.

 

 

1.4        SIGNIFICANCE OF THE STUDY

 

It is hoped that the findings of this research study will help to settle the endless debates on whether wage increase is really the solution to low productivity among civil servants in Nigeria. The conclusion(s) drawn in this study should help administrators in finding lasting solutions in motivating workers in order to improve their productivity. The study might also signify the beginning of the solution to solving the problem of productivity measurement that has defied solutions in the past when it comes to measuring services.

 

 

1.5        SCOPE AND LIMITATIONS OF THE STUDY

 

The study is on ‘Increase in minimum wage and its implications for economic stability and workers productivity’ it were restricted to Nigerian  Civil Servants.

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