Wage Rate, Inflation and Labour Productivity in Nigeria: Evidence from an ARDL Bounds Testing Approach
DOI:
https://doi.org/10.68050/JAMS.2026.677Keywords:
Efficiency Wage Theory, Real Wages, Purchasing PowerAbstract
Although Nigeria's statutory minimum wage has been significantly increased since 2011, there is limited understanding of how minimum wage increases affect labour productivity or contribute to inflation. This study applies ARDL(1,2,3,3,3) bounds-testing to statistical data for 1981-2024 obtained from the National Bureau of Statistics and the Statistical Bulletin of the Central Bank of Nigeria to link the statutory minimum wage with labour productivity measured as labour force participation rate and to link minimum-wage growth with consumer price inflation in another autoregressive distributed lag model in log inflation. The bounds F-statistic (13.94) is above the 1% upper bound and the t-test on the lagged dependent variable is inconclusive, meaning that evidence of a long-run relationship is supporting but not decisive; the error correction term is −0.136 (p = 0.0408), indicating slow adjustment. Coefficients are semi-elasticities: a 10% increase in the minimum wage results in participation increasing by approximately 0.043 percentage points in the year of the change and 0.082 percentage points in the following year, but decreasing by 0.076 percentage points in the long run (which is statistically indistinguishable from zero at p = 0.6014). There is no significant relationship between the growth in minimum wages and inflation (joint p = 0.1423). The results provide no evidence that minimum-wage increases permanently affect labour productivity – though caution should be exercised when interpreting the results, given the step pattern of the wage series and the proxy for the participation rate.
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