Implications of non-payment of workers’ salaries

salariesWilson Onomolease, head, Nigeria Labour Congress (NLC) sub-secretariat, Lagos has an interesting take on the effect of unpaid workers’ wages on the country’s socio-economic life. He says the current trend of non-payment of workers in many states of the federation is a vicious circle that could deepen the looming economic recession in the country.

He likens salaries to a pneumatic pump. “If the pump stops, the air or the pressure in the pipe stops. If the workers do not earn their salaries, other economic activities will be slowed down,” Onemolease adds.

Dr Ernest Simeon Odior, a lecturer in the Department of Economics, University of Lagos takes it a step further, waxing intellectual: “Demand for goods and services in the market would drop because workers will have low purchasing power. Low demand would result in less expansion of market, which inspires low investment and being a circle, might as well affect industrial production.This could be illustrated as: No salary = Low or no Savings = Low or no Investment = Low or no Capital Formation = Low Productivity = Low Income.”

Dr Odior believes that with non-payment of salaries deflation will certainly set into the economy as the money in circulation would be drastically reduced because paying salaries is injection and not paying is withdrawal. “This will hamper growth and productivity in the economy,” he says.

The socio-cultural dimension of non-payment of salaries is that it provides a veritable ground for corruption to grow and fester, analysts say. Non-payment of government workers’ salaries in due time encourages corruption as workers would find other means of “survival”. This, they say, is as a result of survival theory since any worker given any financial assignment would try to survive first before executing or carrying out the financial task. To them, it will increase office bribery and corruption and encourage ‘I don’t care-attitude to work’, which will lower productivity. Experts contend that to continually demand workers’ loyalty to the governments in default of workers’ just emoluments is antithetic to any claims of good governance and a justification for workers’ strike. The corollary is further deep in the country’s gross domestic product (GDP) and standard of living.

Winifred Iyiegbuniwe, a professor of Finance at the University of Lagos believes that the failure of most state governments to pay workers’ salaries is one of the factors that has necessitated the ongoing clamour for the restructuring of Nigeria. He argues that the country’s pattern of federalism is too Unitarian to be practicable by concentrating enormous financial resources in the centre at the expense of the federating units. “Does it make sense for the federal government to take the lion’s share and give the crumbs to the federating states? Let every state control its own resources,” Professor Iyiegbuniwe says.

According to him, the current structure of Nigeria has made it manifestly clear that most of the states are not viable. The multiplication of the federating units from three regions in 1960 when Nigeria got its independence from Britain to the present 36 states structure and 774 local governments was premised on the availability of a ready federal pool of money to be shared. Now that pool is running dry and states that cannot generate revenues are having problems.

The challenge now is for the state governments to go to the private sector and take lessons on how to survive the economic turbulence. Professor Iyiegbuniwe suggests that state governments get of the woods by restructuring their operations, scaling down, laying off workers or looking out for new avenues of revenue. “This is a time when being a governor or finance commissioner is challenging: to bake and not to share the cake,” he says. The implication is that state governments with bloated civil service would be constrained to retrench some of their staff if the lean revenue stretches longer.

To bake the cake means that state governments must strengthen their internally generated revenue to wean themselves from the federal government’s “feeding bottle.” This could be realised by looking beyond the easy tax revenue such as PAYE (pay as you earn) to focusing on neglected areas of tax revenue by bringing in the informal sector into the tax base. “Some market women earn more than civil servants. They have the critical mass and their consumption pattern testifies that they are an important tax base that should not be neglected anymore,” Professor Iyiegbuniwe adds. n

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