Southern Governors want states to decide minimum wage, here's what this means

Governors from the Southern part of the country have proposed the decentralisation of the minimum wage negotiation to allow each state to make agreements with labour unions on affordable and realistic wages.

The 17 Governors, under the aegis of the Southern Governors’ Forum chaired by Governor Dapo Abiodun, made the proposal after a meeting held in Abeokuta, the Ogun State capital on Thursday, June 27, 2024.

Though the Forum agreed with organised labour that minimum wage should be reflective of the cost of living, it demanded that each state should be allowed to negotiate their minimum wage according to their ability to pay.

This comes amid the ongoing debate over a new national minimum wage as organised labour on the one hand and organised private sector, federal, state, and local governments on the other hand, struggle to find a middle ground.

President Bola Tinubu in January set up a Tripartite Committee consisting of representatives of labour, governments and the private sector to negotiate a new national minimum wage, which would then be forwarded to him for approval.

The President is also expected to raise an executive bill on the new wage and send it to the National Assembly for passage.

If it sailed through, the Act would replace the Minimum Wage Act of 2019, which expired in April 2024. Under the old act, the national minimum wage was pegged at ₦30,000.

However, that process has now hit a snag as governors insisted that they can't afford to pay what the Federal Government has proposed.

The Federal Government, backed by the organised private sector, agreed to pay workers ₦62,000 as minimum wage, though it's still far off labour’s demand of ₦250,000.

In effect, it means any establishment in the country employing 25 or above workers must comply with the law, although there are certain categories of workers exempted from this arrangement but that's irrelevant to this piece.

Why are Governors looking for a decentralised wage structure?

Before this latest demand by the Southern Governors, all the 36 state Governors under the auspices Nigerian Governors' Forum (NGF) had made a similar argument, stressing that many states would spend their entire allocation to pay salaries while there would be nothing left for developmental projects if the ₦62,000 proposal is adopted.

They called attention to the fact that minimum wage adjustment also involves consequential adjustments across all cadres, including pensioners.

The Forum also warned that some states would be left with no option but to borrow to meet salary obligations if the proposal sailed through.

After the expired Act was birthed in 2019, a few states with capacity instantly keyed into implementation, some struggled to come on board, while a couple of states are yet to even comply.

For instance, Zamfara just started the implementation of the 2019 Act in June 2024.

The above scenario paints a worrying picture of the financial viability of many states in the country.

While states including Edo, Lagos, Rivers, and Kano are fiscally viable to meet salary obligations and developmental projects, states like Zamfara, Yobe, and the rest are not on the same pedestal.

This means a uniform minimum wage may potentially cause major disruption for some states while others will manage to stay afloat, according to the governors' argument.

What happens if the minimum wage is decoupled?

The Southern Governor's demand bothers on constitutionality. The governors are simply asking the Federal Government to relinquish its power to set the national minimum wage and empower the states to take control of their destiny

If their request manages to see the light of day, it means there will be disparities in government workers' earnings across states. It's not like it doesn't already exist but in arbitrariness.

This portends that a state like Edo may decide to peg its minimum wage at ₦70,000 while Ogun State may opt for something lesser, depending on the agreement with their various state labour unions.

However, the organised private sector will be exempt from this sort of arrangement as they will be bound to honour whatever the National Minimum Wage Act prescribes.