The way Nigeria is currently, a large portion of the economy is comprised of people who work for themselves. This means people in this category are not going to benefit from any minimum wage laws.
Self employed people are therefore, likely to increase the price of goods and services they provide. In other words, minimum wage may lead to an increase in the cost of goods and services.
What then would be the advantage of higher pay, if the cost of products you buy also increase?
If I am an employer, and I'm forced by the government to pay higher wages to my employees, guess what happens to the price of any goods and services I produces? I'd increase the price to make up for the extra expense of paying my employees.
Furthermore, minimum wage is set arbitrarily. It is not based on any market forces. There is a major battle raging in the USA between free-market advocates, and Labour unions. Labour unions, with the help of government, impose high wage obligations on employers. Employers who can't afford it, ultimately decide to outsource their operations overseas. This leads to high unemployment in the USA, as many employers move their operaton to Mexico, China, etc, where labour cost is lower.
Some employers find ways to mitigate minimum wage laws by laying off some of their employees, and making the remaining employees do more.
Minimum wage laws also affect government workers. If any state government finds it difficult to pay the high wages, it is simply going to raise taxes on everybody. It may also reduce other benefits to try to make up for the mandated minimum wage increase.
We need to think very carefully before mandating minimum wage laws on employers in Nigeria.
A classic example of the dangers of minimum wage laws is what is currently happening in Greece. Workers in Greece are striking, including Doctors, Air traffic controllers, etc. They are striking because the government cannot pay the high wages Labour unions have negotiated over the years. High wages and other Labour union laws bankrupted Greece. So now that the government is cutting wages to try to make Greece solvent again, workers who have been used to mandated high wages are going on strikes.
We don't want to turn out like Greece. So we must be careful how much influence we allow labour unions to have in Nigeria.
Goodluck Jonathan is naive to have signed this minimum wage bill into law. If our president really wants to help the economy, he needs to focus on one thing first and foremost - and that thing is 24/7 electricity all over the country.
With stable power, more people can establish businesses. The more businesses there are, the higher would be the demand for workers. The higher the demand for workers, the higher the wages paid by employers.
Put another way, if Goodluck Jonathan creates an economy where employers are fighting to get workers, the employers would voluntarily offer higher wages. This is known as free market forces.
Here is the bottomline, we do not need Labour unions arbitrarily imposing high wages on employers. Instead, let the free market determine wage levels. Countries that force high wages, often get in huge debt, and ultimately collapse, like Greece did.Statistics: Posted by Richard Akindele — Tue Jun 28, 2011 2:47 pm
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