In this second instalment by Anthony Kila, he argues against the demands for an increase in minimum wage on the premise that such move would skyrocket inflation figures. He offers alternative ideas that President Bola Tinubu can embrace to ensure workers and all Nigerians can live comfortably based on what they earn.
Dear Mr President,
Today’s epistle is a continuation of our reflections on the matter of raising wages to meet the rising cost of living. The unpopular, even indecent proposal, from this page is that we should resist the urge to go with the popular opinion and instead go for a new social contract aimed at achieving two separate but linked objectives. One is to reduce the cost of living, made up of the prices of goods and services and the other is to increase the value, real value, of our currency.
As expected, those against the idea of even considering a different way from the most obvious path have not taken kindly to our suggestions. Let us set aside those who went on social media to comment not on the considerations of the initial essay but on the size of my head and the shape of my nose. I suspect they are somehow convinced that I do not care about the fate of poor people living on low wages and that they have perhaps convinced themselves that such perceived indifference stems from the size and shape of my head and nose. A toast to their chosen mode of using their freedom of expression and access to technology is in order I guess; I also think a “thank you for reading” is what the editor of this paper would like me to say to them. To each its own…
To those who bothered to read and comment on the content of the essay let us start by clarifying that my opposition to automatic and matching wage increases as demanded by labour is based on the certainty that the most conspicuous part of any wage increase in the current situation will only lead to and be swallowed by the ugly tunnel of inflation. There are two major reasons for the increase in prices of goods and services that are making wages not enough to meet people’s needs. One is the sudden increase in the cost of production caused by the increase in the cost of energy to produce and transport goods and services. The second reason for the hike in prices stems from scarcity caused by reduced production of agricultural products (no thanks to bandits, kidnappers, and terrorists that have made the farms unfarmable) and theft of crude oil that makes it impossible for the country to meet its potential and projected capacity.
It is important to also clarify that my proposal for keeping prices low does not consider let alone include automatic price control mechanisms and price control boards. I believe in the supremacy, splendour, and sanctity of the market and I hold sacred its ability to regulate the price of goods and services as well as the attitude of those operating in the market. Like every believer, I also believe in the power of human acts (such as prayers and various kinds of rituals) to influence the supreme force. To lower the prices of goods and services, strengthen our currency, and by so doing move away from nominal towards real values in evaluating our wages, what I propose we do is to focus on increasing the supply side of the economy.
Like every human intervention to influence the supreme force, acts of sacrifice and offering, dedication and discipline, soberness, and candour are required. And therein lie the elements of the new social contract that can save us from the debilitating spirit of inflation.
Instead of making promises they cannot keep, the government and all those with knowledge of and access to the country’s coffers must come to clearly declare to all that there is not enough money to dole out and that everyone needs to sacrifice. The government needs to plead for understanding and patience.
A government that says to people “You need to sacrifice and be patient” cannot however be seen to be spending senselessly or making sloppy policy summersaults, rather it should be doing and be seen to be doing three things to earn its very needed moral authority to persuade and negotiate. One is cutting the frills linked to government appearance and operations, second is going after those who have looted and wasted the funds of the commonwealth. Based on our past, recovery of looted and wasted funds should be considered a targeted revenue centre in a new and fair social contract for the country. Third is that the government should be seen to have a clear shared vision that can be translated into a path made of action plans.
A new social contract with all will focus on training manpower that can innovate, invent, and produce needed goods and services at low costs of production because the government through fiscal and monetary policies will proactively work with anyone that has ideas and operations capable of increasing production of goods and services. We need to plan and move towards a system where regions and communities across the country are known not for religion, rebellion, or crisis but for what they produce. Let every corner of the country find its comparative advantage and trade it with the rest of the country. Please note that I am not talking of exports at all here, that is a story for another day.
Feed first the people and every other thing can be done after. The starting point of the new social contract must be food. There should be a deliberate plan that is measurable in policies aimed at reducing the cost of food by increasing its supply and facilitating the reduction of the cost of production and distribution. Feeding the people must however not be seen as a philanthropic or extraordinary measure but rather a system and an industry that creates jobs and wealth and that attracts investments and bright ideas.
Education, health, transportation, and accommodation are four other major areas that take away a lot from our wages. We need to make sure we reduce the amount of people using private hospitals and schools. We need to ensure state schools and hospitals are good enough to accommodate more people. Why should a person earning less than triple the minimum wage be patronising a private school or hospital if the State ones were worthy of being called schools or hospitals? Communities need to step in to help manage and support their schools and hospitals. Why should a school or hospital set up by a church cost more than state schools and hospitals? We also need to have frank and constructive conversations about the cost of accommodation, the rates agents are charging, and the idea of paying annual rent in a country where people are paid monthly.
Another sacrifice and effort the government needs to bring to the table is to rethink its source of revenue. Some taxes need to be reduced or frozen. A lot of government assets need to be sold or somehow put on the market to generate funds. It is time for everyone who is nominated or elected to work for the government of Nigeria to show with proof what value they add every thirty days.
Join me if you can on Twitter @anthonykila to continue these conversations.
Anthony Kila is an Institute Director at CIAPS. www.ciaps.org
