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ANALYSIS OF TRADE UNIONISM AND WAGE DETERMINATION IN NIGERIA

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CHAPTER ONE

INTRODUCTION

  • BACKGROUND TO THE STUDY

Nigeria is a resource-rich country with a fast growing economy that has recorded growth in Gross Domestic Topic (GDP) of over 7 per cent per annum in the past decade. However, this growth has neither generated employment nor translated into poverty reduction nor addressed inequality in the country. In fact, studies have mostly shown negative indicators on the general wellbeing of the Nigerian worker and people in the last decade. The proportion of people living below the national poverty line has worsened from 65.5 per cent in 1996 to 69.0 per cent in 2010. Inequality rose from 0.429 in 2004 to 0.447 in 2010 as measured by Gini coefficient. Unemployment rate is also increasing in an alarming rate; 21 per cent in 2010 to 24 per cent in 2011. In a nutshell, the overall economic improvements in the country’s Gross Domestic Topic have not translated into improvements in the welfare of the average Nigerian worker (Nigeria-African Economic Outlook, 2013).

Among the negative indicators is the average Nigerian worker’s remuneration level. Despite the stable economic indices recorded in Nigeria, particularly through the global economic crises, the average Nigerian worker ranks among the lowest paid globally. The Global Wage Report revealed that the average wage growth rate has remained far below pre-crisis levels globally. The global average wage growth rate only started to grow at 0.2 per cent in 2011, after a steady decline to 1.3 per cent in 2010 from 2.3 per cent in 2007 that marked the year of global economic crisis. The Nigeria economy surprisingly was reported to have done fairly well during the crisis period when most economies crumbled (Nigeria Economy Review, 2010). According to Nigeria Labour Congress (2009), Nigerian workers are among the least paid when compared to other countries in Sub-Saharan Africa (SSA), despite the country’s huge earnings from crude oil. A Nigerian worker earns on average of 550 dollars per annum, only above countries like Madagascar, Democratic republic of Congo and Malawi, whereas, the minimum wage of a worker in Botswana is five times more than that of a Nigerian worker (see Fig. 1).

The deplorable state of Nigerian workers is further aggravated by the huge disparity between the average workers’ salaries and political office holders. Between 2006 and 2007, workers’ salaries increased by less than 40 per cent while those of political office holders increased by over 800 per cent. For instance, the salary of the Chief Speech Writer to the President increased from N626, 700 to N4, 392,012. The salary of the members of the House of Representatives increased from N865, 200 to N13, 202,402. Whereas the difference between managers and workers is not only one of the highest in the world, out of every N1 paid as wages, managers collect more than 80 kobo while workers receive less than 20 kobo with the difference increasing over the years (NLC, 2009). In the face of increasing inflation of about 14 per cent, the salary of a Nigerian worker is barely enough to meet basic needs, with the situation made worse by the fact that those working also have to support family members who form part of the huge army of unemployed in the country (Agba and Ushie, 2013).

In order to defend their rights and fight unjust exploitation, Nigerian workers have resorted to engage in trade unionism which provides a collective platform to voice out their frustrations.  Workers have rights under the International Labour Organization (ILO) conventions of 1987 and 1998 to join with unions and collectively bargain their employment contract. These unions engage in the struggle for the rights and welfare of members especially for decent wages and improved working condition. Where negotiations fail to achieve the desired result, unions are noted to resort to industrial actions such as strike, work-to-rule, demonstrations and street protest – which are capable of not only halting production process but sometimes and more crucially, the economy (Tar, 2009).  Nigerian Trade Union movement comprises a variety of unions that represent the interest of their members that all come under the umbrella of Nigeria Labour Congress (NLC). The collective strength offered by the unions presents a good avenue for workers to press home their demands. This is largely so because trade unions are officially recognized as the representative of their members. Without unions and the collective platform to present their common interest, employees become vulnerable while employers assume unilateral management of work and negotiation of salaries. This, according to Dunlop (1958) will distort the tripartite system of industrial relations that involves the employers (represented by management), employees (represented by the trade union) and the Government.

Nigeria, like other developing economies, employs two methods of fixing wages. The first being a centralized government regulated system based on statutory laws, administrative decrees and compulsory arbitration. The second is collective bargaining as represented by trade unions with limited legal interventions as practiced in other developed countries like North America (Dunlop, 1958). It’s argued that centralized wage determination is more beneficial to developing countries due to the vulnerable nature of their economies. The reason put forward is that trade unions through collective bargaining negotiate for wages that are ‘too high’ thereby eroding competitiveness in the international market. Secondly, trade union’s bargain leads to inequitable distribution of income leading to widening wage disparities among workers. Also the process of their bargaining permits open industrial conflict that results in loss of output which these economies cannot afford and which discourages foreign investment. One major characteristic of industrial relations in Nigeria from early 1940s with respect to wages is the use of commissions by the Government as a vehicle for all major wages and salaries review, which acts as a barometer for others to follow. See Appendix 1

Anyim et al (2012), identified three levels in Nigeria’s industrial relation by which wages and salaries are fixed. The first is Joint Consultation/Single Employer Bargaining (JCC). This involves management and worker’s representatives of a single company, organization or government parastatal. These parties discuss and agree on matters of mutual interest at the unit or grass root level between the management and workers’ representatives. The second is Industry-Wide or Multi-Employer Bargaining which involves negotiation between representative of employers (Employers Association) and representatives of workers (Trade unions) belonging to the same industry. A good example is the negotiation between Nigeria Employers Association of Banks, Insurance and Allied Institutions (NEABIAI) and National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE) for junior employees and Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI) for senior staff in the banking industry. The third level is the National or Tripartite Bargaining involving the three actors in industrial relations-government, labour union and management representatives. The essence of bargaining at this level is to lay down guidelines and standards guiding all private and public sector establishments in the nation. A good instance for organizations in Nigeria is the National Minimum Wage Act.

Figure 1: Wage comparison among Sub-Saharan African Countries

 

  • STATEMENT OF PROBLEM

The financial and competitive position of most industries in Nigeria has been undergoing a steady deterioration. This decline has been attributed to mostly economic and political factors, however one single factor mostly blamed for this deterioration is the defective system of wage determination within the country. It is perceived as the cause of the widespread dissatisfaction and unprecedented rise in the number of industrial unrest among workers in the country (Chienye, 1985). Nigerian workers are among the least paid in the world and their quest for a realistic sustainable wage level through collective bargaining by unions is often confronted with serious opposition and resistance. The N18, 000 minimum wage fixed for a Nigerian worker is insufficient to carter for his/her basic needs, much less helping to pursue other aspirations. Agba et al (2009) observed that as a result the proportion and frequency of wage induced disputes in Nigeria is alarming and unprecedented. From Data compiled from the Central Bank of Nigeria (CBN) Annual Statistical Bulletin for various years, the number of disputes declared in Nigeria between 1968 and 2004 is 6,287; the number that resulted in strikes is 4,079, that is 64.88 per cent. The number of workers involved in strikes in this time is 10,755,205, and the man-days lost as a result is 296,189,399.  The average of these figures per annum show that the number of disputes reported is 170, work-stoppages 110, number of workers involved 290,681 and man-day lost 8,005,118. These statistics are crippling for a developing economy like Nigeria.

Against this background of excessive exploitation of Nigerian workers is also the challenge posed by globalization. The transformation of production methods from fordism to flexible specialization and the increasing diversification of the labour market to encompass new categories of workers in new types of employment relationships such as temporary, part-time or contract workers points in the direction of a more adverse industrial relation atmosphere (Adewumi and Adenugba, 2010). According to 2012/13 Global Wage Report, this trend has resulted in a change in the distribution of national income, with the workers’ share decreasing while capital income shares increases due to technological progress, trade globalization, the expansion of financial markets and decreasing union density, thus eroding the bargaining power of labour unions. The report also observed that personal distribution of wages has become unequal with a growing gap between the top 10 per cent and the bottom 10 per cent of wage earners.

The trend of growing wage gap is attributed to many factors. Madheswaran and Shanmegam (2003) in line with the neoclassical theory posits that the wage disparity can be attributed to some factors such as non proportional ratio of unskilled labour to skilled labour in developing economies. Unions in these economies are fighting against this disparity by agitating for increase in wages. Other factors identified in literature that might cause wage disparity in an economy include risk factors associated with a job, education, efficiency of labour, age, marital status, gender, location (rural/urban), sector of employment, industry, wage policy, union density etc. Unions generally attempt to compress the trend of growing wages disparity among their members.

Having identified unions as one of the labour market institution that influence wage fixing, and provides a platform for workers to organize themselves and sell their labour services collectively. It follows that unions provide a strong voice for the people, and oppose the exploitation of workers by employers and unfair government policies, hence enhancing members’ economic and social welfare as well as providing political and psychological benefits to their members (Farber, 2001; Borjas, 2010; Holcombe and Gwartney, 2010). Unions actively intervene in monitoring, and stirring inefficient institutions in the economy, opposing incompetence in government while also serving as the mouthpiece of the people (Nwoko, 2009; Madheswaran and Shanmuam, 2003; Fapohunda, 2012). They not only protect their members, but also manipulate the wage rate members are paid through labour contracts entered with employers, thus restricting labour supply and increasing the demand of the products produced. Unions are known to bargain for wage rates above the competitive market level in developed countries but in Nigeria and most developing countries, unions’ negotiated minimum wage rates are far below the market level.

The recent activities and the pressure put on the Nigerian economy, her government, investors, employers and her citizens by trade unions under the umbrella of Nigeria Labour Congress (NLC) has been the incentive to embark on this research topic. Trade union organisation is regarded as fundamental human rights organisation geared towards seeking to provide, protect and improve workers’ welfare who are members, and inevitably improve the general welfare of other workers in the economy through spill-over effect and threat effect. With the goodwill of the workers at heart, trade union activities has resulted to several industrial actions such as strikes, demonstrations etc which has halted production, created unstable work environment and discouraged investors from investing in the economy. Comparing the state of Nigeria workers with that of their counterpart in other Sub-Saharan African countries also shows their deplorable state as low income earners, highly contracting with economy which is rich in natural resources. One begins to reconsider and evaluate whether unions actualize their goals in improving the welfare of ordinary Nigerian worker.

This was the basis for the research objective of this study to find out whether workers earn higher by becoming unionized. The second objective is to understand following the first objective, whether it is just high wages that attract workers to be unionized or other factors like discrimination in the labour market due to education, gender, marital status, sector and location of employment that cause workers to become unionized. Finally, from the result to infer if trade unions have done their job or have in cause of pursing their goals harmed the economy. Thus, the following research questions and objectives have been formulated:

 

1.3    RESEARCH QUESTIONS 

  1. Is there any significant wage disparity between unionized workers and nonunionized workers?
  2. What other factors determine trade union participation in Nigeria?
  3. Are trade unions harmful to the Nigerian economy?

 

 1.4      RESEARCH OBJECTIVES

  1. To ascertain if there is any significant wage disparity among unionized workers and their nonunion counterparts.
  2. To investigate the factors that determines trade union participation in Nigeria?

 

 

 

1.5       RESEARCH HYPOTHESES

HO1:  There is no wage disparity among unionized workers and nonunionized workers.

H1:     There is wage disparity among unionized workers and nonunionized workers.

HO2:  There are no other factors that determine trade union participation in Nigeria.

H2:     There are other factors that determine trade union participation in Nigeria.

 

1.6       SIGNIFICANCE OF THE STUDY

Workers wages is one of the key factors that the government of Nigeria manipulates through income policies, minimum wage and other policy instruments to boost the welfare of the people, raise the standard of living, enhance and speed up economic growth. The understanding of what drives unionism and participation in Nigeria would be of a keen interest to the policy makers and government and also employers of labour. As it would influence the fiscal policy of taxation and government aggregate expenditure.

Therefore, the findings of this study will highlight the factors that motivate workers to join unions. This study attempts to emphasize the underlining reasons for the flourishing of unions in the Nigerian economy, and also ascertains how harmful and beneficial their activities are to the economic welfare of the nation. Thus, this study will enlighten policy makers of the nation to guide them on the right policy decisions to formulate and implement on the labour relations between the government and unions.

Also, the study will be beneficial to researchers, political activists and students who are interested in the institutional frameworks of the country that affects labour relations and the operations of a competitive labour market.

 

1.7       SCOPE OF THE STUDY

            The study intends to capture it objectives by using the survey data of Nigeria using 2004 Nigeria Living Standard Survey (NLSS).

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