Poor and unpaid wages are an affront to social justice

The French economist Thomas Piketty took the world by storm in 2014 with his book Capital in the Twenty-First Century. The 685-page tome raised the tempo and tone of the debate on poverty and inequality. Of course, the distributional question, the social justice puzzle, has long been at the heart of economic analysis. It was central to David Ricardo’s Principles of Political Economy and Taxation (1817), where he demonstrated that a small social group, landowners, were claiming a disproportionate share of national income, through excessive land prices caused by population growth and land scarcity, leaving only a tiny share to the rest of the population, thus upsetting the social equilibrium. It was also the chief concern of Karl Marx, who raged in his book Capital (1867) at the concentration of wealth in fewer hands, i.e. industrial capitalists, through infinite capital accumulation. This led Marx to predict (unsuccessfully, one must say!) an apocalyptic end to capitalism.

Piketty built on these earlier works, but added to our understanding of the issues around inequality. He pointed out that the distributional issue was defined in the 19th century by a patrimonial society in which a minority lived off its wealth, while the rest of the population worked to eke out a living! However, although the old patrimonial society was disrupted by the First and Second World Wars, a new form of patrimony is emerging in which a few rich elite owns a large proportion of national wealth, while the majority of the people earn and own little! This idea of a new patrimonial society comes to mind as I think about the phenomenon of low and unpaid wages in Nigeria, and it’s on it that I would anchor this intervention.

Now, wages are significant because they are a determinant of wealth. The two dimensions of wealth are income from labour and income from capital. The former includes wages, salaries and other labour-related earnings or remuneration, and the latter consists of rent, dividends, interest, profits, capital gains, royalties etc. But, as everyone knows, income from capital, i.e., from savings, investment, properties etc, is usually the biggest and most sustainable source of wealth. The generations that save, invest and acquire capital assets are richer and wealthier than those that don’t. Yet, unless one benefits from an inheritance, income from labour is the only means by which you can accumulate such capital in the first place. Even if you get a bank loan, your earnings will serve as a critical test of your credit-worthiness. Thus, what you earn can determine what you own! This is why wage inequality is a major cause of wealth inequality!

Well, Piketty’s view about the new form of patrimonial society is thus insightful. He argues that inequalities in income from capital are growing largely because the labour market is being skewed to give a new social class an excessive share of the income from labour. According to Piketty, members of this small social class, top executives or super-managers of organisations, are awarding themselves huge salaries, bonuses etc that hardly reflect their performance, while an underclass of ‘working poor’ has emerged who are earning very low wages. Indeed, some super-managers earn several hundred times more than the ordinary employees. What is more, they use their huge earnings to accumulate capital, sometimes ranging from ten to 20 times their income or even more, whereas the low-wage earners own very little. Piketty argues that the capital/income ratio is at the heart of wealth inequality. This is because as the rate of return on capital increases, the owners of capital become richer and wealthier and the gap between them and those who have no assets becomes wider.

Clearly, the key message here is that capital accumulation, i.e. through saving, investing, and acquiring assets, is a principal means of tackling inequality in society. For this reason, several decades ago, the former British Prime Minister, Margaret Thatcher, promoted the idea of a property-owning democracy by encouraging those who were tenants in council flats to buy them with government support. Indeed, in many Western countries, the emergence of a propertied middle-class became a significant development of the 20th century, and a key antidote to wealth inequality. But an economy made up largely of an underclass of ‘working poor’ will never be able to tackle inequality because the people don’t earn enough even for subsistence let alone to acquire capital assets. Yet, such wealth inequality or concentration is incompatible with the principles of social justice fundamental to modern democratic societies. Thus, low wages and unpaid wages are enemies of social progress, and have no place in any civilised society.

But let me introduce another dimension to the distributional question. As noted above, distributional issues are often addressed in an economic context. Thus, David Ricardo, Karl Marx and Thomas Piketty were all concerned about the internal logical contradictions of the capitalist system, and their bugbears were landowners for Ricardo, industrial capitalists for Marx and super-managers for Piketty. But the social justice question should also be discussed in relation to the bankruptcy of the political system. For instance, what about the inequality engendered by the oppressive political class who, like the old landowners and industrial capitalists, capture a disproportionate share of the national wealth for themselves and their families through excessive income from labour (not to mention outright corruption) and an infinite accumulation of capital that ensure that wealth and power are concentrated in their hands while the vast majority of the population earn little and own little, if at all?!

For instance, what Piketty said about the new patrimonial elite who earn and own so much while the vast majority of people earn and own so little is also true about Nigerian politicians. Just as the super-managers pay themselves huge salaries and bonuses while the ‘working poor’ earn less than the ‘living’ wage, Nigerian politicians award themselves large salaries and allowances and pay the ordinary workers ‘peanuts’. I mean, think of it, the minimum wage in Nigeria is a meagre N18,000 per month! But, to take a few examples, a senator earns N8.2 million per annum while a member of the House of Representatives earnsN4.2 million, and these do not include allowances and other perks, which run into several millions of naira. As one newspaper editorialised, “It would take a working man on the minimum wage (of N18,000) the whole of his life to earn a senator’s annual salary!”. Of course, he may not even earn it throughout his life! Yet, these huge salaries bear no relation whatsoever to the performance or productivity of the legislators. For instance, according to a recent study commissioned by the UK Department for International Development (DfID), over 50 draft bills have been pending in the National Assembly since 2015!

And, of course, with these huge salaries, coupled with, truth be told, money stolen from the state treasury, Nigerian politicians are able to accumulate capital assets across the country and overseas, thereby raising their capital/income ratios, while the poor workers on low wages are condemned to a low capital/income ratio as they do not earn enough to own anything of value! All over the world, countries are moving from the minimum wage to the ‘living’ wage. For instance, the UK adopted in April this year the National Living Wage, under which workers will be paid a lot more than with the minimum wage. In Nigeria, the Constitution provides for a living wage. Section 16(2)(d) says that “The State shall direct its policy towards ensuring that … reasonable national minimum living wage (is) provided for all citizens”. Surely, the government should follow the constitutional provision and pay workers a living wage even if it means (and rightly in my view) reducing the salaries and allowances of the politicians. Furthermore, capital accumulation should be promoted among ordinary Nigerians, with targeted government support. Such measures would help in tackling the huge income and wealth inequalities in the country.

However, low wages is one thing; unpaid wages is another! It’s like a double whammy: workers are paid ‘peanuts’ and yet they don’t even receive them regularly! A recent report in the Vanguard newspaper stated that 26 states owed workers’ salaries, with, for example, Osun having unpaid outstanding wages from July 2015; Plateau owing five months; and Ondo five months. Several of these states also owed unpaid pensions, subjecting pensioners, many of them old and indigent, to financial pains. At the inception of the Buhari administration, the federal government “bailed out” the states to enable them to pay their workers’ salaries. Apparently, the funds were diverted to other directions as most of the states still owe their workers several months’ wage arrears. It would seem that bailout or not, some of the states have other priorities than the payment of workers’ salaries!

Of course, there are the wider issues of political restructuring, of the country’s economic and financial challenges, of the capacity of most the states to generate revenue internally, and of a bloated workforce and even bogus employees. These are issues that need to be tackled head-on for a long-term solution. But none of these provides any reasonable justification for not paying workers’ salaries. For instance, if financial crisis is the cause of the non-payment of wages, why is it that the legion of political office holders is not affected by the epidemic of unpaid salaries? British politicians often use the phrase “We are all in it together” to demonstrate that everyone, including the elite, must make sacrifices to deal with the economic situation. In Nigeria, it’s the poor workers alone who are making the sacrifices, with unpaid wages, while the politicians continue to collect huge salaries and allowances, accumulate capital and concentrate wealth and power in their own hands.

Yet Nigeria ratified the International Labour Organisation’s Protection of Wages Convention (1949). Article 12(1) of the Convention states that: “Wages shall be paid regularly”. Surely, the persistent non-payment of workers’ salaries is a flagrant violation of the letter and spirit of that provision. Let’s be clear, the evil-twin of low and unpaid wages undermines social progress, and is an affront to social justice. What’s more, for a country and people so religious, it’s also iniquitous; for a labourer, the Bible says, deserves his wages. Low and unpaid wages cause hardship and privation for workers and their families. They have no place in any civilised society, and not in Nigeria!

 

Olu Fasan