Macroeconomic and Household Welfare Impact of Increase in Minimum Wage in Nigeria : A Computable General Equilibrium Model

Given the down turn of economic activities in Nigeria and the agitation for minimum wage increase, this study investigated the impact that increases in minimum wage will have on households welfare in Nigeria using a Computable General Equilibrium Model. The study formulated two scenarios – increase in minimum wage of workers by 211% and 150%, being increase from N18,000 to N56,000 and from N18,000 to N45,000 respectively. The data used for the study is a reformatted Social Accounting Matrix for Nigeria. The simulation results of scenario one revealed that, a 211% increase in the minimum wage of workers will increase agricultural output, industrial output and exports while imports will be depressed marginally and then lead to increase in households welfare indicators of income, consumption and savings by 6.76%, 5.0% and 3.61% respectively. The result of scenario two revealed that, increasing minimum wage by 150% will lead to increase in agricultural output, industrial output and exports while imports will fall and then households‟ welfare indicators of income, consumption and savings will increase by 5.75%, 4.83% and 2.96% respectively. Similarly, the study found that, the Hicksian Equivalent variation as a measure of welfare impact of the policy is positive and high in all the simulations. The study concluded that an increase in minimum wage of workers has positive and significant impact on household welfare in Nigeria. Therefore, it is recommended among others that the government should as a matter of urgency accede to the demand of the organized labour and increase the minimum wage of workers from N18,000 to N56,000 (211% increase) and ensure that it is fully implemented across board