29/01/2019
*WAGE INCREASE; ITS IMPACT ON NIGERIA ECONOMY*
Ummm, this is indeed a nice topic and as a matter of fact let me tell you I love my country and as a result should is say the impact of wage increment on my dear country.
Let's hit the nail on the head as we enlighten ourselves.
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Wage Is defined according to English dictionary as; An amount of money paid to a worker for a specified quantity of work, usually expressed on an hourly basis.
It has a synonymous meaning as pay,salary,earnings etc.
In the contest of this writeup ,it is referring to salary but we'll be using wages up to the end of the write up.
Impact( A significant or strong influence; an effect.) can be positive or negative but in this writing we'll major on the negative effect of it.
Economy has many definition but we'll be using this; The system of production and distribution and consumption.
It is therefore worth saying the topic is the impact of minimum wage increment on production, distribution and consumption.
Let's take its impact one after the other as we follow.
Are you still reading?
Okay let's go...
*It's impact on production*
An increase in wage rate will increase the cost of production of goods and services I.e labour and as such, companies may decide to employ few workers. In some situations,they may lay off the workers they have and will as such reduce the capital-labour ratio required to produce certain quantity of products.
Producers as we know aims maximising their profit,which can be achieved when they have low amount of cost which is not achievable here.
To solve this,they will want to reduce the quality of the products they produce and which may have effect on the consumers.
Another effect it will have on production Is that,the producers will start to purchase more machinery to fit the place of labour and with also employ unskilled labour to man the machinery thereby reducing the number of jobs available in the economy.
*It's impact on consumption*
In a period of increased wages,the level of consumption by the consumers whose pay has now increased will go up.
As we know that an increase in income will leads to an increase in consumption expenditure. They'd be willing to consume more of the goods and services so produced.
Their mindset would have left the fact that the private sectors that are producing will also want their share of the increased wage rate.
For instance, a labour who pays #10,000 for her child's school fee will be thinking if her pay is increased,she'll be able to pay more and save. This doesn't work in real sense because the wages of workers are in one way or the other a determinant of price of commodities. As the proprietor of such schools gets to know that there is an increase in the wage rate,they'll in no doubt increase their school fee.
Why?
Because their staffs also want increase in their salary too and at the end we will see that the said increase has leveled back to its normal state.
We should care to ask ourselves about the number of wage increments we've had in times past,during those times I know workers will be rejoicing but let's ask ourselves what happens to the money.
Some people said there should be increase in wage rate as a result of recession.It's a good one but have we forgotten the place of inflation. Our country is already faced with inflation. Increasing wage rate will in no doubt worsening the situation.
Then what can then be the way out of the mess we are in this country?
The best answer is creation of an enabling environment for everyone as this will reduce the cost of production and the welfare of the entire citizenry.
Another thing we should focus in is wealth creation through small and medium size firms and other revitalising sectors like agriculture so as to create more wealth instead of us wanting increase in wages thereby borrowing more and reducing wealth creation.
I say, if we can focus on creating an enabling environment and also wealth creation we'll be better off.
I drop my pen here.
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