The strongest lesson yet from the recent impasse between the labour federations on one hand, and both the federal and state governments on the other, over whether or not (and how) to implement the new national minimum wage is not that there are clear limits to politics. Or how else do you describe accent to a statute in the run up to a general election and massive foot-dragging on implementation post-elections? We ought not to run away from acknowledging the fact that there is a lot amiss with a government invitation to a stakeholder segment in its community to join it in looking for ways in which they could collectively break a law of the land.
Arguably, governments’ bad balance sheets had a role to play in the onset of cold feet over the minimum wage. Hard to forget that the head of the federal government’s newly minted fiscal team had indicated in her submission to the Senate during her confirmation hearings that the economy suffers from a serious need to reduce the cost of government. To the extent that the new national minimum wage would inflate the already high recurrent portion of governments’ budgets, it was a problem even before the president put pen to paper turning a piece of legislation into law. Wise before the fact, contumacious after? There are easier ways to run a country.
Beyond these, we are invited by the minimum wage debacle to confront an even uglier reality. We are apparently at that stage in the development of our economic space, where changes at the margin in our management of the economy can no longer deliver on the outcomes we seek. What are these outcomes? Domestic output growth, for whatever the available data is worth, has averaged 7% since 2004. And…? Not much effect has been seen by way of a reduction, in both absolute and relative terms, of the number of our nationals living below the poverty line. Depending on the preferred hurdle rate — US$1 OR US$2 a day ―the numbers of Nigerians currently threatening the country’s social cohesion, are as high two-thirds of our 140 million people.
Admittedly, fiscal leakages may have contributed to distorting the local allocation mechanism in a way that ensures an unevenness in the sharing of the gains from the elevated output growth numbers. If therefore government could find the will to plug the haemorrhage of red ink on its books, we may yet be able to guarantee the pass-through to main street of our recent economic gains. Still, there is a further source of concern. And this is that even an annual growth rate of 7% might by itself be insufficient to meet this goal. Our relatively high birth rates are part of the problem. In the same vein, volatile domestic prices, themselves a reflection of underlying structural problems in the economy are also implicated in this underperformance. The nub of the matter is that if we must meet the challenge of improving lives at the lower deciles of our economy’s ladder, we should be shooting for double-digit output growth rates over the next 30 years.
Why is this combination of extreme want and large numbers of people (the vast majority of whom are young and unemployed) important? Recent events in the Middle East and the North African region suggest that it is capable of driving a different and more lethal haemorrhage of red fluids. How much of our economic underperformance is the result of an incomplete metamorphosis? In terms of the legal requirements, the transition from a public sector-driven economic model to one where the private sector should be the main engine of growth is all but complete. The missing ingredient is provided by a civil service that has not migrated from service provider to regulator.
What else must we do in response to the growth/development challenge that will determine the economy’s direction over the next decade? We could take a cue from the IMF’s recommendation to the G8’s Deauville Summit in May, and dismantle “the existing framework of stifling economic regulations, state involvement in production and employment, a private sector based on privilege rather than competitiveness, generalised price subsidies instead of targeted social protection, and an educational system that no longer delivers on the expectations of students or their potential employers”.