Explaining Nigeria's Economic Growth through the Minimum Wage Policy
Keywords:
Minimum Wage, Economic Growth, Productivity, Nigeria
Abstract
The study investigated the relationship between wage policy and output in Nigeria from 1981-2018. The study utilised the Autoregressive Distributed Lag mechanism on the variables of interest such as minimum wage, investment, lending interest, credit to the private sector, inflation and economic growth. The result showed there was evidence of a positive relationship between minimum wage and investment in the short and long runs. Also, there was evidence of a positive relationship between minimum wage and economic growth in the long run only. In addition, the growth impact of minimum wage reduced in the long-run as more potential growth improving variables were examined. Therefore, the study concluded that upward review of wages is a necessary but not a sufficient income policy for the Nigerian economy. Hence, the study recommends periodic and consistent review of wages that is consistent with the stipulated time frequency of 5 years; with provision for wage indexation and complementary investment related expenditures to cushion the negative unemployment and inflationary effect of minimum wage policy in Nigeria.
References
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Adelakun, O. J. (2011). Human capital development & economic growth in Nigeria. European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online). 3(9)
Adema, J., Giesing, Y., Schӧnauer, A., & Stitteneder, T. (2019). Minimum wages across countries. ifo Institut-Leibniz-Institut für Wirtschaftsforschung an der Universität München, München, 16(4), 55-63
Aderemi T. (2018). Minimum wage and the working poor in Nigeria: Is there a link? Indian Journal of Labour Economics. https://doi.org/10.1007/s41027-018-0109-4
Aishah, S. N. (2012). Minimum Wage Policy Effects on Economic Growth. (Published Master’s Thesis, Graduate School of Business, University Utara Malaysia). Retrieved from http://ettd.uum.edu.my/3585/
Askenazy, P. (2003). Minimum Wage, Exports and Growth. European Economic Review, Elsevier. 47(1), 147-164
Cahuc, P., & Michel, P. (1996). Minimum wage, unemployment and growth. European Economic Review. 40(7), 1463-1482
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Census and Economic Information Center (2020). Nigeria GDP per Capita. https://www.ceicdata.com/en/indicator/nigeria/gdp-per-capita
Chima, O. (2018). Nigeria: Report explains Effect of Nigeria’s low Minimum Wage on Workers’ Output..
https://allafrica.com/stories/201805040025.html
Cukierman, A., Rama, M., & Ours, J. V. (2001). Long-run growth, the minimum wage and other labour market institutions. Centre for Economic Research, Tilburg University. https://www.researchgate.net/publication/228962257
Fanti, L., & Gori, L. (2011). On economic growth & minimum wages. Journal of Economics. 103 (1), 59-82
Flug, K., & Galor, O. (1986). Minimum wage in a general equilibrium model of international trade and human capital. International Economic Review. 27(1), 149-64
Folawewo, A. O. (2009). Minimum wage legislation & its macroeconomic impact in developing countries: The case of Nigeria. Asian-African Journal of Economics and Econometrics. 9(1), 57–73
Friedman, A. (2005). Wage distribution & economic growth. Discussion Paper (13). Bank of Israel Working Papers.
Ghani, N. (2016). The impact of minimum wage on small businesses, workers, & employment in the United States. International Journal of Humanities and Social Science. 6(10), 1-5
Idiaye, C., Kuhn, A., & Okoruwa, V. (2018). Minimum wage policy and rural household welfare in Nigeria. 30th International Conference of Agricultural Economists. July 28- August 2, 2018.VANCOUVER
ILO (2006). Minimum Wages Policy.
https://web.archive.org/web/20091229085643/http://www.io.org/public/english/protection/condtrac/pdf/infosheets/w-1.pdf
Mwangi T. W., Simiyu F., & Onderi A. (2015). The effect of minimum wages on the labour market, migration and income distribution in Kenya: CGE Analysis. https://www.semanticscholar.org/paper/The-effects-of-minimum-wages-on-the-labour-market%2C-Mwangi-Simiyu/afcab31c98e2a63eacf2de6f43f5390375f95433#paper-header
Nickell, S. and Laynard, R. (1999). Labour market institutions & economic performance. Handbook of Labour Economics. (3), Edited by O. Ashenfelter and Card D.
Obeng, S. K. (2015). An empirical analysis of the relationship among minimum wage, investment and economic growth in Ghana. African Journal of Economic Review. 3(2), 85 – 101.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approach to the analysis of level Relationships. Journal of Applied Econometrics. (16): 289-326
Ravn, M., & Sorensen, J. (1999). Schooling, training, growth & minimum wages. Scandinavian Journal of Economics, 101(3), 441-457
Sabia, J. J. (2015a). Minimum wages and gross domestic product. Contemporary Economic Policy 33(4), 587-605
Sabia, J. J. (2015b). Do minimum wages stimulate productivity and growth? IZA World of Labour 2015:221
Taiwo, I., Oladeji, S. I., Akerele, W., Adenikinju, A., Bamidele, O., & Uga, E. (2005). The political economy of minimum age in Nigeria. Issue 1 of Monograph Series, National Centre for Economic Management & Administration, Ibadan.
Watanabe, M. (2013). Minimum wage, public investment, economic growth. Theoretical Economic Letters, 288-291
Wage Indicator Foundation. https://wageindicator.org/salary/minimum-wage/nigeria. Accessed October 2nd, 2019
World Bank (2019). World development indicators, Washington DC: World Bank
Abowd, J. M., Kramarz F., Margolis, D. N., & Philippon T. (2000). The tail of two countries: Minimum wages and employment in France and the United States (No.203). IZA Discussion Paper Series.
Adebayo, A. A (2017). Navigating the labyrinth of the contemporary nigeria labour market: Are there green light? Inaugural Lecture Series 398, Obafemi Awolowo University Press. https://ir.oauife.edu.ng/handle/123456789/3764
Adelakun, O. J. (2011). Human capital development & economic growth in Nigeria. European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online). 3(9)
Adema, J., Giesing, Y., Schӧnauer, A., & Stitteneder, T. (2019). Minimum wages across countries. ifo Institut-Leibniz-Institut für Wirtschaftsforschung an der Universität München, München, 16(4), 55-63
Aderemi T. (2018). Minimum wage and the working poor in Nigeria: Is there a link? Indian Journal of Labour Economics. https://doi.org/10.1007/s41027-018-0109-4
Aishah, S. N. (2012). Minimum Wage Policy Effects on Economic Growth. (Published Master’s Thesis, Graduate School of Business, University Utara Malaysia). Retrieved from http://ettd.uum.edu.my/3585/
Askenazy, P. (2003). Minimum Wage, Exports and Growth. European Economic Review, Elsevier. 47(1), 147-164
Cahuc, P., & Michel, P. (1996). Minimum wage, unemployment and growth. European Economic Review. 40(7), 1463-1482
Central Bank of Nigeria Statistical Bulletin. 2018 edition.
Census and Economic Information Center (2020). Nigeria GDP per Capita. https://www.ceicdata.com/en/indicator/nigeria/gdp-per-capita
Chima, O. (2018). Nigeria: Report explains Effect of Nigeria’s low Minimum Wage on Workers’ Output..
https://allafrica.com/stories/201805040025.html
Cukierman, A., Rama, M., & Ours, J. V. (2001). Long-run growth, the minimum wage and other labour market institutions. Centre for Economic Research, Tilburg University. https://www.researchgate.net/publication/228962257
Fanti, L., & Gori, L. (2011). On economic growth & minimum wages. Journal of Economics. 103 (1), 59-82
Flug, K., & Galor, O. (1986). Minimum wage in a general equilibrium model of international trade and human capital. International Economic Review. 27(1), 149-64
Folawewo, A. O. (2009). Minimum wage legislation & its macroeconomic impact in developing countries: The case of Nigeria. Asian-African Journal of Economics and Econometrics. 9(1), 57–73
Friedman, A. (2005). Wage distribution & economic growth. Discussion Paper (13). Bank of Israel Working Papers.
Ghani, N. (2016). The impact of minimum wage on small businesses, workers, & employment in the United States. International Journal of Humanities and Social Science. 6(10), 1-5
Idiaye, C., Kuhn, A., & Okoruwa, V. (2018). Minimum wage policy and rural household welfare in Nigeria. 30th International Conference of Agricultural Economists. July 28- August 2, 2018.VANCOUVER
ILO (2006). Minimum Wages Policy.
https://web.archive.org/web/20091229085643/http://www.io.org/public/english/protection/condtrac/pdf/infosheets/w-1.pdf
Mwangi T. W., Simiyu F., & Onderi A. (2015). The effect of minimum wages on the labour market, migration and income distribution in Kenya: CGE Analysis. https://www.semanticscholar.org/paper/The-effects-of-minimum-wages-on-the-labour-market%2C-Mwangi-Simiyu/afcab31c98e2a63eacf2de6f43f5390375f95433#paper-header
Nickell, S. and Laynard, R. (1999). Labour market institutions & economic performance. Handbook of Labour Economics. (3), Edited by O. Ashenfelter and Card D.
Obeng, S. K. (2015). An empirical analysis of the relationship among minimum wage, investment and economic growth in Ghana. African Journal of Economic Review. 3(2), 85 – 101.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approach to the analysis of level Relationships. Journal of Applied Econometrics. (16): 289-326
Ravn, M., & Sorensen, J. (1999). Schooling, training, growth & minimum wages. Scandinavian Journal of Economics, 101(3), 441-457
Sabia, J. J. (2015a). Minimum wages and gross domestic product. Contemporary Economic Policy 33(4), 587-605
Sabia, J. J. (2015b). Do minimum wages stimulate productivity and growth? IZA World of Labour 2015:221
Taiwo, I., Oladeji, S. I., Akerele, W., Adenikinju, A., Bamidele, O., & Uga, E. (2005). The political economy of minimum age in Nigeria. Issue 1 of Monograph Series, National Centre for Economic Management & Administration, Ibadan.
Watanabe, M. (2013). Minimum wage, public investment, economic growth. Theoretical Economic Letters, 288-291
Wage Indicator Foundation. https://wageindicator.org/salary/minimum-wage/nigeria. Accessed October 2nd, 2019
World Bank (2019). World development indicators, Washington DC: World Bank
Published
2022-08-28
Section
Articles
