What is the national living wage?

A national living wage is the amount of money the government of a country thinks is just right for a family to meet their annual needs. The wage is different from the minimum wage and is usually higher. The problem with using a living wage is that there will be a need to use different wages for different regions within a country.

The national living wage explained

During a national broadcast by the president of Nigeria, Asiwaju Bola Ahmed Tinubu, on the 1st of January 2024 he mentioned the use of the national living wage and not the national minimum wage in use today. And that the government is working on implementing it. A system of living wage implies that a sum of money is paid to employees within a country that will cover their basic needs without the need to have a second job (also referred to as a side hustle). 

A national living wage should consider the family size, the inflation rate within the region, the location of the individual, and his or her skill set. Therefore, it implies that the government will need to make a restriction on the number of individuals that should make up a family, probably restricting the wage to only four or six members of the family aside from other criteria.

Differences between national living wage and minimum wage

The national living wage is the amount of money that is just right to meet the needs of a family within a period. On the other hand, the minimum wage is not expected to meet the needs of the family. 

Living wage is usually higher compared to its counterpart. Therefore, individuals receiving it may not consider having a side hustle. But this might not be the case, since human wants are not satisfiable. 

Generally, most countries around the world, especially developed ones, use the national minimum wage rather than the living wage. 

While the living wage might help improve the individual standard of living, it is not a fair way of paying employees of the private sector and civil servants in the public sector. The reason is that it discriminates among various regions. Some states in the country will pay a higher living wage than others.

Factors to consider in deciding a living wage

The following factors are considered when deciding on a national living wage:

Family size:

This seems to be the most important factor. Policymakers in the country must consider what family size should be used in deciding the minimum wage and if both spouses are expected to support the family with their income. Also, the number of children to be included in the wage. This implies that using a living wage can serve as a population control.

Location: 

The location of the individual may affect his or her living wage. A person living and working in a rural area may be provided with a lower minimum wage than individuals working in an urban area. This is because it is assumed that city life is more expensive than villages. 

Inflation:

Inflation varies among states within a country. For example in Nigeria, the inflation rate in Lagos and Abuja are higher compared to Nasarawa and Niger states. Therefore, those living in high-inflation areas will be paid a higher national living wage than those in low-inflation communities.

Skill set:

Another area of consideration is the skill set of the individual. The living wage paid to a practicing doctor will be higher than that paid to a cleaner. 

Unemployment:

Only individuals who are gainfully employed are paid a national living wage. Unemployed graduates may not be provided with any income that will help in sustaining themselves.