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Minimum Wage and the Working Poor in Nigeria: Is there a Link?

Taiwo Aderemi ()

The Indian Journal of Labour Economics, 2017, vol. 60, issue 3, 481-499

Abstract: Abstract In the last two decades, the effectiveness of the minimum wage as a poverty-reducing tool has come under criticism. It has been observed that a weak link exists between poor workers and minimum wage. Similarly, in countries such as Nigeria, minimum wage determination is not indexed to price movements, thus nominal wage changes do not adjust for price changes. The consequence of this is that, the worth of minimum wage is rapidly eroded. Few studies exist on this topic in Nigeria, despite its relevance for policy guidance. This study therefore adds to the literature by examining the link between minimum wage and poverty status of its intended beneficiaries in Nigeria, using 2004 and 2009 household survey data. Findings show that, although the minimum wage is targeted at the poor-working group, the link is not strong. More importantly, the minimum wage policy in Nigeria has a marginal poverty-reducing effect. Plausible explanations for the marginal effect are the poor targeting of minimum wage workers and the rapidly declining value of nominal minimum wages overtime. Gradual and regular adjustments of the minimum wage to the consumer price index are recommended, as it will help preserve the worth of the wages.

Keywords: Minimum Wage; Poverty; Nigeria; Low wage earners (search for similar items in EconPapers)
JEL-codes: J08 J3 J31 (search for similar items in EconPapers)
Date: 2017
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