According to Maslow’s hierarchy of needs theory, the journey to self-fulfilment is taken in five steps.
The first is to meet basic needs like food, water, warmth, and rest. It is also the motivation behind most people’s quest to earn a living.
But paying wages is tricky. On one side, you have an employer who seeks to pay the minimum amount to get a job done. And on the other hand, an employee who strives for higher wages.
This is an acute problem for low paying jobs, where there is a risk that salaries are not enough to meet basic needs. For workers to live comfortably, the right balance must be reached.
This is what the government looks to address when they implement a minimum wage.
The minimum wage is not enough
This is a national income floor - that is, the lowest amount that can be paid to anyone working at a job. Many countries and state capitals review this value occasionally to reflect economic realities such as inflation and higher cost of living.
In Nigeria, this review doesn’t happen frequently. The minimum wage in Nigeria was recently increased by 67% to ₦30,000, after eight years of continuous pressure from the National Labour Congress (NLC).
Enacting the minimum wage as a law is a step in the right direction. However, even at ₦30,000, it hardly meets the basic needs of many workers.
According to a Pew survey, about 52% of people in the US voted for a wage increase to $15 per hour - more than double the current minimum wage. The Living Wage Foundation also estimates that the minimum wage in the US is about 20% too low to sustain employees.
The NLC, Nigeria’s famous advocate for a fair minimum wage, confirms this situation while explaining how insufficient the amount is.
“₦30,000 translates to ₦1,000 per day. If you have a family of six - a husband and wife with four children, it translates to ₦50 per meal”, the NLC president had said during a press briefing with the House of Representatives to solicit for the increase.
Using the latest National Bureau of Statistics (NBS) poverty and inequality report, it costs around ₦226 to get the daily recommended calories for an individual - the food poverty line. A family of five that depends on a minimum wage earner will struggle to meet this requirement.
To fix this universal problem of insufficient minimum wage, something else was created - a minimum living wage.
Nonprofit organisations such as the Living Wage Foundation introduced the minimum living wage as the lowest income that can sufficiently meet people’s basic needs.
Some governments have adopted it; for instance, the living wage in London is £10.75 while the national minimum wage is £8.72.
The aim is a more realistic salary, one that would allow workers to achieve a comfortable lifestyle with a family.
This salary is often significantly higher than the basic minimum wage. For example, the living wage in Renville County, Minnesota, for someone in a family of two working adults and three children is $18.80. Compared with a minimum wage of $10. The higher living wage is due to the higher living costs in the county. The government doesn’t pay the living wage in this case, but it acts as a guide for private companies.
In Nigeria, the minimum living wage, calculated by Wage Indicator - a platform which publishes labour sector information, ranges between ₦32,000 to ₦104,000 per family of one to four children.
However, Nigeria’s minimum wage at ₦30,000, is the minimum adopted across the entire country’s labour force regardless of their location or family size.
The benefits of a living wage not only include enabling individuals to have a better life, but it also increases productivity in the workplace. Someone who can’t have a healthy life is unlikely to perform well at work.
According to an Economic Policy Institute study, people have seen their productivity increase by 70% following a 15% increase in their wages.
The reality of paying a living wage
The reality is that the minimum wage is already a strain for governments and companies to pay.
As of December 2019, when states were due to start paying the minimum wage of ₦30,000 to their staff, over 20 states were not able to meet the deadline. Even when the minimum wage was ₦18,000, these states were not able to cope.
There is also the concern of higher wages putting pressure on inflation. Higher wages means more costs for firms, and they may pass this on to consumers.
While all these concerns are valid, and people would most likely feel them in the short term, better pay can make workers more productive, which is an effective way to reduce costs in the long run.
It's tough to argue for states with insufficient funds to raise workers wages. Companies who also grapple with breaking even are hard-pressed for funds, and end up paying the least possible wages to preserve cost.
However, possibilities still exist. Some living wage proponents have argued for salary redistribution among workers. Executives at the top receive a disproportionate amount of income relative to minimum wage workers. Both the Nigeria government and private companies have room to address this.
Other proponents have tagged the living wage as the sole responsibility of the government. Tax waivers, aids and grants are some examples they believe the government can introduce to supplement income.
How much is enough?
There are several ways to know how much is enough. The Wage Indicator mentioned earlier is one option. But there are more comprehensive ways that help individuals come up with their unique minimum living wage.
Amy Glasmeier, a professor of economic geography and regional planning at Massachusetts Institute of Technology (MIT), calculated the living wage for all US states using the cost of food, childcare, health, housing, transportation, other expenses and taxes.
Her formula on the living wage is based on a basic needs budget.
Basic needs = Food cost + childcare cost + (insurance premiums + health care costs) + housing cost + transportation cost + other necessities cost.
The number of dependents - such as children and unemployed partners, determines the value of each item in the calculation.
Using these elements, Prof. Glasmeier calculated the lowest possible value which would still give each family a decent level of income, after considering the people that rely on the pay for support. This is very similar to how the Wage Indicator earlier mentioned, works.
The main idea is ensuring that people know how much will be sufficient to meet their basic needs comfortably.
This has nothing to do with living an extravagant lifestyle, but more about living a life that can ensure they move one step closer to self-fulfilment.
A former employee of a top law firm in London who moved to Lagos corroborated this “In my previous job, the approach to salary was interesting. It was a top law firm, so salaries were very good, But the best part of their salary structure was that they paid enough for everyone to not worry about money.”
This might be an unrealistic ask for all firms, but the acknowledgement of making employees comfortable still sticks.
Nowadays, companies are using non-monetary benefits to help employees have a comfortable life, such as food provision and health insurance schemes.
And where there’s an opportunity to use money directly, it should be disbursed. Shortly after the minimum wage agreement last year, resource-rich states like Lagos and Rivers declared they were willing to pay above the stipulated minimum wage.
However, current realities with the pandemic may have constrained resources for many employers of labour and cast a shadow on the living wage becoming the norm for now.
Ironically, these same realities show why the minimum pay for any individual should sufficiently meet all basic needs.
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