Former Governor of Lagos State and Minister, Babatunde Fashola, has promised to provide a reasoned contribution to the conversation on minimum wage. He began by stating that the extant law on minimum wage is the National Minimum Wage Act 2019, which came into force on April 18, 2019. The law provides that the national minimum wage expires after five years and shall be reviewed in line with the provisions of the Act.
Babatunde Fashola emphasized that it is the minimum wage that has expired, not the Act itself. He also highlighted the importance of understanding the definition of minimum wage, which is provided in Section 3 (1) of the law as a national minimum wage of not less than N30,000 per month. However, he noted that the law only provides for wages, not salaries, and that wages and salaries are different and should not be conflated.
The Constitutional Authority for Minimum Wage
Fashola pointed out that the constitutional authority for the Federal Government to make laws on wages is found in item 34 of the 1999 Constitution as amended in the Exclusive Legislative list. This confers power on the National Assembly to legislate on labor, including trade unions, industrial relations, and prescribing a national minimum wage for the federation or any part thereof.
However, Babatunde Fashola noted that the word used in item 34 is “minimum wage”, which does not include salaries. He emphasized that efforts to improve minimum wage must be specific to wages and not translate to a salary overhaul. He also highlighted the difference between wages and salaries, with wages referring to payment based on an hourly rate and salaries being a fixed annual amount.
Babatunde Fashola Gives Distinction Between Wages and Salaries
Babatunde Fashola, former Governor of Lagos State and Minister, clarified the difference between wages and salaries, emphasizing that while both are methods of compensation, they are not interchangeable terms. Salaries are fixed annual amounts paid at specific intervals, such as monthly or bi-weekly, whereas wages are payments based on an hourly rate and the number of hours worked. This distinction is crucial in understanding the legal framework surrounding minimum wage legislation.
Babatunde Fashola’s explanation highlights the potential legal issue with the National Assembly’s legislation on minimum wage. By prescribing a monthly payment of N30,000, the Assembly may have overstepped its constitutional authority, which only extends to legislating on wages, not salaries. This subtle distinction could have significant implications for the ongoing minimum wage review and the broader conversation around compensation in Nigeria. By understanding the difference between wages and salaries, stakeholders can engage in a more informed discussion about fair compensation and the legal framework that governs it.
Babatunde Fashola: The Global Method for Computing Minimum Wage
Babatunde Fashola, former Governor of Lagos State and Minister, proposed a new approach to calculating minimum wage, aligning with the global method that defines wages as an hourly rate. By applying this definition, the minimum wage would be significantly different, amounting to N173.07 per hour, rather than the current N30,000 per month. This alternative calculation method offers a more accurate representation of wages, ensuring a fairer compensation structure.
Babatunde Fashola’s suggestion is reinforced by international best practices, where adjustments to minimum wage do not necessarily lead to drastic changes in the overall salary compensation scheme. By adopting a more precise calculation method, Nigeria can align with global standards, promoting a more equitable and sustainable approach to wage management. This shift in perspective has the potential to positively impact the country’s labor market, fostering a more informed discussion around minimum wage and compensation practices.
A Call for a Reasoned Approach to Minimum Wage Review
Babatunde Fashola, former Governor of Lagos State and Minister, stressed the importance of a well-reasoned approach to the minimum wage review, urging stakeholders to base their discussions on empirical evidence and a thorough understanding of the legal framework. By doing so, the conversation can be guided by facts rather than emotions, ensuring a more informed decision-making process. Babatunde Fashola’s emphasis on a reasoned approach highlights the need for a thoughtful and nuanced discussion, one that considers the potential consequences of any changes to the minimum wage.
Babatunde Fashola’s call for clarity in distinguishing between wages and salaries is crucial in avoiding distortions in the compensation scheme. By recognizing the differences between these two forms of compensation, stakeholders can develop a more precise understanding of the minimum wage’s impact on the labor market. This clarity can lead to more effective policymaking, as decisions are grounded in a deeper understanding of the complex relationships between wages, salaries, and the broader economy. By adopting a reasoned approach, Nigeria can ensure a more sustainable and equitable compensation structure, benefiting both employers and employees alike.
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