A minimum wage is the statutory minimum wage that employers can pay per month in Nigeria.
Today, President Muhammadu Buhari signed into law the Minimum Wage Repeal and Re-Enactment Act, 2019. By this act, the new minimum wage is now N30, 000 from N18, 000. The President assented to the Act on Thursday in Abuja, mandating all employers of labour across the country to pay workers a minimum of N30, 000 monthly wage.
Higher wages increase incomes and potentially cause higher consumer spending. However, there is a danger a minimum wage can cause higher unemployment, which would cause lower economic growth.
If workers receive a pay increase, then there will be a rise in consumer spending. Low-income workers are likely to have a higher marginal propensity to consume (in other words they spend high % of extra pay).
This could also cause a multiplier effect, with higher spending causing knock-on effects to elsewhere in the economy; this should help boost economic growth.
However, if we assume that a minimum wage does cause lower employment, then rising unemployment will have a negative impact on demand. People who become unemployed would spend less, leading to lower demand.
What do you think, good move or not good enough?