By Charles Onunaiju
The simple and obvious reason why wage increase for Nigerian working people would be good for the current sputtering economy is that it would spur domestic demand, boost supply and expand local productivity. It would also enhance domestic liquidity and create a robust and efficient market that prospective foreign investors are actually looking out for and which is also the key attraction to any economy for prospective investors, both foreign and local. The rest of this modest intervention will attempt to flesh out the economic rationale for increase and robust wages for workers, which would not only guarantee an efficient domestic market but also create the requisite value chain to keep it both sustainable and on a stable trajectory of incremental growth.
The supply-side traditional economics that have dominated Nigeria’s policy space since the return of civil rule in 1999 has nearly run its course, and the practitioners, including official economic advisers, have not cast their net wide enough to appreciate the boundless space of economic science to tackle new problems from a dynamic and fresh perspective. The near canonization of supply-side economics by Nigeria’s authorities and their official economic advisers has perennially ignored the simple axiom of one of the world’s economic thinkers, Kenneth Galbraith, that economic policy should never be held as a religious faith, for the simple reason that such attitude will damage the critical factor of pragmatism that is implicit in economic science.
In simple terms, what will a robust wage increase for Nigeria’s working people or a demand-side economic outlook to do the current state of Nigerian economy? The slump in the local supply of essential and basic agricultural products as food and its ancillaries, which has triggered high price is because of weak demand, associated with poor wages. The current state of atrophy in the services of artisans which include tailors, welders, mechanics, carpenters, farm workers and the low demand of their services is because of poor and stagnant wages of the working people.
Due to poor and stagnant wages, many workers are compelled to forsake the purchase of new modest furniture for their homes and even cannot afford to repair the old broken ones and an idling carpenter who would have been engaged to make a new furniture or repair the old one would likely become a social miscreant at best or a criminal or even a terrorist at worst. Had the average Nigerian worker earned enough to buy a modest new furniture or even repair the old ones, he would have created a demand for the carpenter who would in turn, ensure a supply of his services and the efficient market in which the two operate and interact will not only ensure price stability but also create the conditions for social amity necessary for peaceful co-existence.
A worker with a stable and sufficient wage and income will instigate steady demands for food items which includes tomatoes, pepper, okro, fish, meat, vegetables and many others that assure the farmers and other allied producers in the value chain to expand production and ensure a stable supply, with the resultant interactions, that enables an efficient market with price stability, thereby driving away the inflationary monster, which is the root cause of price instability and other market distortions.
A robust rise in worker’s wages would cool down the volatility of the foreign exchange market, as it would spur strong domestic demands, expand productivity and increase supply. The outcome of this process will deliver enhanced value to the national currency. Worker’s wage rise will not trigger a run on the local currency but will add value to it through vigorous demand.
Wage increase for the Nigerian working people will not trigger massive capital flights and relocation of domestic capital, as humongous liquidity in the hands of few elites would do and has been doing. Nigerian workers with reasonable liquidity from wage increase would not seek to own palatial mansions in Dubai and other foreign countries but may decide to build or buy a modest bungalow, thereby triggering demand for local artisans that include block molders, carpenters, welders, local interior decorators and others. Should his or her earnings became reasonably enough to take a holiday, he or she is most likely to consider a visit to local tourist sites as Obudu ranch, Gurara waters falls, Bauchi game reserves and many other such local tourist sites that has currently fallen out of reckoning due to lack of local patronage and a fall in the demand for their services.
In a situation where the average Nigerian worker’s earning increases, the demand for local tourism would revive the local tourist industry that is comatose and create a new generation of practitioners, with prospects to absorb the bourgeoning labour market of unemployed youths.
An enhanced and robust worker’s wages would create the broad base liquidity that is the core characteristic of an efficient market which is the main and most decisive attraction for foreign direct investments. The main reason why China and other Asian tigers have become the magnet for foreign investors is because of the efficient market in which stable and steady demands for goods and services offered by foreign investors are guaranteed, with good prospects of profitable returns on Investments.
Singapore, the Asian famous city-state known for its meteoric rise from the third world to first, sealed her iconic status as a magnet for foreign investors and oasis of high social mobility and stability with high wages for workers, the highest in Asia, followed by the Hong Kong special administrative region of China, that is also prosperous for the same reason as Singapore.
Despite the political and ideological differences between China and the West, including the West’s posturings of “decoupling” ,the Chinese market of 800 million middle class, the largest in the world remain a premium magnet for European, American and Japanese investors, who see more of more money to be made in China and refused to be distracted by the chilly political rhetoric of the political establishment.
Chinese and other Asian markets came into reckoning by creating. a demand/supply equilibrium in which their working people earned sufficiently enough to instigate a viable domestic market that also become attractive to foreign investors. China never held investment road show or summit abroad but maintained pragmatic policy environment which encouraged and built up a stable domestic market. With the increasing political rhetoric of “decoupling” by the West, the Chinese authorities designed a pragmatic policy response of what it called “Double circulation” in which Beijing outlined that while the domestic market and international market would freely interact, the emphasis would be on building and consolidating the domestic market, so that any shock arising from the disruption of the international market would be better managed, without any consequence for domestic upheavals.
No economy or anyone else, for that matter can manage effectively the periodic turbulence of the International market, without substantial stability of the domestic market. And domestic market cannot endure for long with wage freeze or workers low wage without incurring the disturbing maladies of inefficiency, low morale of the work force, and consequential social ills as corruption, indolence, banditries, terrorisms and others.
The usual Nigeria government response to issues of wage increases for Nigerian working people is that workers is only a small fraction of the total population is actual untenable because the prospects of their demand will cascade along the value chain impacting the development of efficient market and broad based economic resilience. The other point that government does not have enough money to fund robust wage increase is only politically convenient for the elite but utterly untenable from a pragmatic economic point of view because prioritizing economic recovery means that public expenditure should be focused on investments with value multiplying effects, especially in expanding productivity.
The reason for public expenditure and for which government is necessary is to expand the common wealth that arises from the vigorous interaction of demand and supply in an orderly and efficient market. A government that awards to itself along with its personnel, disproportionate size of the public expenditure as evident in the life styles of government personnel and assorted retinue of their hangers-on, is the principal reason for the distortion of the domestic market and all the consequences of both social, economic and political that arises from it.
As the government of President Ahmed Bola Tinubu and the representatives of the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) are in negotiation to fashion out basic or minimum wage for the Nigerian workers, let it be clear that a robust wage increase is in the best interest of the Nigerian economy. For as long as the Nigeria economy catered for the greedy few with consequences for low productivity and weak demand, the economy cannot optimise its potential to meet the needs of Nigerians and trigger the desirable untrammeled and sustained growth with the virtuous outcome of integrated and inclusive development.
The case for robust wage increase for Nigerian working people is not just a moral one but of compelling economic and social significance for securing the future of the country.
• Mr. Onunaiju, is research director of an Abuja based Think Tank