Economics

Wages: Definition, Types, Wage Determination



Wages are rewards paid for the services of labour. That is to say, the amount paid to labour for the services it rendered during production.

wages

Types of Wages

1. Nominal Wages

Nominal wages, also known as money wages are the total quantity of rewards paid to labour which are measured in monetary terms. That is to say, the total amount of money paid to labour in a given period of time.

2. Real Wages

Real Wages are the total amounts of goods and services which the rewards paid to labour can purchase. That means the purchasing power or what the money paid for labour can buy.

Reasons For The Differences in Reward For Labour/Why Workers Earn Different Salaries

1. Period of Training

Some workers spend more years to acquire their training than others and therefore, they are rewarded more than their counterparts. For instance, Medical Doctors and Engineers spend more years during their training than Typists and Clerks.

2. The Amount Spent In The Course of Training

Those who spend more amount in the course of their training are rewarded more in line with what they spent during training.

3. The Skill Requirement in a Work

While it requires special skill acquired through training, to be a Doctor or an Engineer, it does not need any special skill for one to be a messenger or a cleaner. Hence, Doctors and Engineers are paid far more than Messengers and Cleaners.

4. The Rate of Demand and Supply

The rate at which a particular labour is demanded relative to its supply affects the reward it will attract. For instance, the demand for unskilled labour is far lower than its supply, and therefore, its reward is low. The demand for Medical Doctors is still higher than their supply, hence, the higher pay to Medical Doctors.

5. The Role of Trade Unions

Trade unions which act as umbrella that brings some workers together play significant role in bringing about differences in rewards of labour. In some cases, they use the instrument of industrial action to press for higher rewards for their members.

6. The Level of Productivity

The higher the level of productivity of workers, ceteris paribus, the more the rewards the workers will get.

7. The Societal Value of a Particular Job

The extent the society values a particular job determines what the reward for such labour will be. For instance, the society places high premium on the work of clergymen than others, even though they do not produce tangible commodities, hence the work of clergymen attracts higher pay.

8. The Relationship Between Employee and Employer

This at times has nothing to do with the level of productivity and the qualification of the worker.

9. The Risks Involved in a Job

Those jobs that involve more risks attract higher pay. The workers that risk their lives like Pilots are paid higher than their counterparts in less dangerous jobs.

10. Gender Consideration

In some society where there is gender discrimination, men are rewarded more than their women counterparts. These male chauvinists have the erroneous belief that men work harder than women and therefore, should be paid higher.

Wage Determinations

Wages can be determined under the following three approaches.

1. The Forces of Demand and Supply.

2. Activities of Trade Unions.

3. Government policies.

Unemployment in Nigeria: Causes & Solutions



Unemployment in Nigeria is the situation whereby some people who fall within the ages of the working population, capable and willing to work, are not able to due to certain conditions.

Unemployment-in-nigeria

The problem of unemployment is becoming chronic without solution being in sight. It has constituted itself into one of the worst enemies of the people in this part of the world. It has also been exacerbated by the prevalent retrenchments, unbridled rural-urban migration, to mention but a few.

Types of Unemployment 

1. Underemployment

This is a situation whereby the potentialities of a worker are not fully utilised. There are financial, mental and physical underemployment.

It is financial when a worker is not getting equal pay to the work he/she is doing, mental when there is mismatch between the work a person is doing and what he studied, and physical when the worker is underutilised.

2. Frictional Unemployment:

This arises when people leave their current job with the hope of getting a better one but fail to do so at a given period of time. It may not be a temporary unemployment depending on the prevailing economic situation. Therefore, this is the period between the time the worker left their former jobs and the time of getting a new one.

3. Deficient Demand (Cyclical) Unemployment 

If there is a decrease in the quantity of goods demanded or there is over-production which results in fall in prices, industries will be affected. The workers affected will suffer from deficient or cyclical unemployment.

4. Structural Unemployment 

This arises as a result of slight changes in the industrial structure of a country. Workers will be retrenched as a result of this caused by economic recession and it happened in Nigeria in 1984, when many firms folded up as a result of this.

5. Voluntary Unemployment 

This unemployment in Nigeria which is delibrate occurs when some people refuse to take up any paid employment or decide not to do any work. For example, some husbands may order their wives not to do any type of work but to stay at home as full time housewives.

6. Seasonal Unemployment 

This is caused by seasonal changes that affect some types of work. Workers that work in road construction companies remain unemployed during the rainy season. Also farmers stay idle during the time in between harvesting and planting periods.

7. Search Unemployment 

This arises when some people turn down offers to work in search of better paid employment. How long this search will last will depend on the prevailing economic situation in this country.

Causes Of Unemployment In Nigeria

The following are the causes of unemployment:

1. Absence of Industrialization 

West African countries do not have enough industries that can absorb the large number of school leavers every year.

2. Poor Agricultural System 

Many school leavers do not consider agricultural sector as one of the areas where they can get employement because it is still underdeveloped and unattractive.

3. Lack of Social Amenities in Rural Areas 

This constitutes push factor to rural-urban migration which makes the youths prefer settling in the urban areas even if they get employment in the rural areas.

4. When Supply is Higher than Demand

This will affect many industries and cause retrenchment or layoff of workers.

5. Economic Recession 

Many industries were forced to fold up as a result of the world economic recession that hit the world at different times.

6. Faulty Educational System

The educational system Nigeria inherited from our former colonial rulers lays emphasis on writing, reading and arithmetic, which equips us to be job seekers rather than job creators.

7. High Cost of Education 

The exorbitant cost of higher education in West Africa prevents many school leavers from furthering their education and roam about the streets of our urban areas instead of being in institutions of higher learning.

8. Faulty Development plans 

Our leaders plan for the establishment of more schools and colleges without corresponding available places to absorb the upsurge of youths from these schools and colleges.

9. Overpopulation 

Our population increases without a proportional increase in the avenues of employment opportunities thereby leaving a large proportion of the population unemployed.

Solutions to Unemployment In Nigeria

The following are the solutions to unemployment:

1. Achieving Industrialization 

Establishing many industries will create more employment opportunities.

2. Making Agriculture More Attractive 

This can be done by developing agriculture and those in it should earn more salaries and wages so that it can attract youths to it.

3. Provision of Social Amenities to Rural Areas 

This will make many school leavers to work and reside in rural areas.

4. Good Development Plans 

Schools and colleges should be established based on the available places that will absorb the products of these institutions.

5. Encouraging Geographical Mobility of Labour 

Unemployed people should move to areas other than theirs in order to secure gainful employment if vacancies exist there.

6. Restructuring Our Educational System 

Pre-vocational courses like mechanics, electronics, woodwork, metal work etc should be taught; these will make our educational products to be job creators instead of job seekers.

7. Population Control 

Optimum population will help solve our unemployment problems because it will bring our population to equilibrium point with our resources.

The Nigerian Tax Law: All You Need Know



Collecting taxes are one of the ways government generates revenue for carrying out it assignments. People in the developed world know the importance of taxes and take it upon themselves to pay.

taxation

For those thinking of evading taxes, they do so with fear. When caught, you will pay direly for it. In countries like the United Kingdom, tax is one of the most important way by which the government generate revenue and though the rates are high, the results gotten are encouraging.

However, in a country like Nigeria, not everyone pays tax. In fact, it has been stated that over 70% of its citizens are not paying tax. And for the ones paying, many of them play tricks to reduce the amount levied as tax on them. The situation however is changing in states like Lagos where they have the Lagos Inland Revenue Service (LIRS) coming down on defaulters.

Taxes are paid to either the Federal Government through the Federal Inland Revenue Service (FIRS) or State government depending on its type. Let’s take a look at the Nigeria tax acts

Nigeria Tax Acts

The list below contains the list of tax acts in Nigeria.

  • Associated Gas Re-Injection Act
  • Capital Gains Tax Act
  • Companies Income Tax Act
  • Deep Offshore and Inland Basin
  • Production Sharing Contracts Act
  • Tertiary Education Trust Fund Act
  • Federal Inland Revenue Service (Establishment) Act
  • Income Tax (Authorized Communications) Act
  • Industrial Development (Income Tax Relief) Act
  • Industrial Inspectorate Act
  • National Information Technology
  • Development Act
  • Nigerian Export Processing Zones Act
  • Nigeria LNG (Fiscal Incentive Guarantees and Assurances) Act
  • Oil and Gas Export Free Zones Act
  • Personal Income Tax Act
  • Petroleum Profits Tax Act
  • Value Added Tax Act
  • Stamp Duties Act
  • Taxes and Levies (Approved List for Collection) Act
  • Casino Act

Top 5 Taxes In Nigeria

Below are the 5 popular taxes in the country picked from the list of taxes above. A short description of each of the taxes is given below.

1. Value Added Tax(VAT)

The Value Added Tax otherwise known as the Sales Tax was enabled by the Value Added Tax Act, No 102 of 1993. This tax is payable by the consumer at 5% of the net value added based on eligible transactions once consumed.
VAT is usually paid to the State’s Department of revenue.

However, if you’re a business, you should find out which products are sales-tax eligible so that you don’t have to over-pay by paying VAT on the wrong items. As a business, here’s how you can calculate your VAT. You can either use the invoice-based method or the accounts-based method.

For the invoice-based method, sales transactions are taxed, with the customer informed of the VAT on the transaction. This is the most widely employed method. It is expected that all registered businesses possess a VAT registration certificate with the VAT registration number boldly displayed on all invoices.

As a consumer, you can always look out for the VAT registration number to ensure that the VAT being charged is legal.

2. Personal Income Tax Act (PITA)

PITA is payable by all individuals and registered businesses aan partnerships except those registered under Part A of Companies and Allied Matters Act 1990.

3. Employment Tax

If you run or own a business, it is expected that a certain amount of your company’s responsibility fall on your employees and you’re expected to file these when submitting your tax returns to the State Government.

4. Self-employment Tax

This tax is primarily paid by individuals who work for themselves. These include sole proprietors and partners and it is based on the income of the business.

Also, if you’re a LLC owner, you ought to also pay the self-employment tax. However, if you’re the chairman or CEO of a corporation and you work as an employee you don’t have to pay the self-employment tax

5. Capital Gain Tax

This was enabled by the Capital Gains Tax Act, Chapter 42, LFN 1990. The Capital Gains Tax is a 10% tax imposed on Capital Gains arising from a sale, exchange or other disposition of properties known as chargeable assets.

Conclusion

Conclusively, it is important to note that you need to visit any government agency saddled with tax related issue to get a detailed information about each of these acts and which ones apply to you.

In cases were their offices are not available, you can have employ the service of a tax consultant for ignorance of the law is not an excuse. If you’re caught evading tax, the government will milk you dryer than how you would be while paying tax.

Taxation: Features, Principles of Good Tax System



Tax may be defined as a compulsory contribution contribution imposed by a government authority on goods, individuals, corporate bodies, etc, irrespective of the exact amount of services rendered to the tax payer in return, and not imposed as a penalty for any legal offense.

taxation

Features of a Tax

1. Tax is a compulsory payment.

2. The money realised from tax is for the general good of all.

3. It is levied by the government or its agents.

4. Tax is charged irrespective of the exact amount of services rendered to the tax payer in return.

5. Tax is not imposed as a penalty for any legal offence.

6. People must attend certain age before they start paying tax.

Principles of a Good Tax System

1. Equity

Tax should be based on a person’s ability to pay and there should be equality of sacrifice, that is, the burden of tax should be according to one’s ability.

2. Certainty

Tax payers should know the exact amount they are expected to pay, when and how to pay it.

3. Convenience

The method and time of tax collection should be convenient to the tax P.A.Y.E. is considered the most convenient method of tax system.

4. Economy

The amount spent in the course of collecting tax should be smaller than the amount collected.

5. Impartiality

There should be no discrimination in the collection of taxes i.e., people of equal financial positions should pay the same amount as tax.

6. Flexibility

A good tax system changes with the changing circumstances in the area it is charged.

7. Simplicity

A good tax system should be simple enough for everybody’s understanding.

8. Easy to Collect

People collecting the tax should not find it difficult to collect.

9. Hard to Evade

It should not be the one that people can easily evade.

10. Productivity

This tax system should yield enough revenue to the government and also not to hinder production.

11. Fiscal Instrument

A good tax system should form a fiscal instrument used in controlling inflation and deflation, etc.

Sources of Government Borrowing and Reasons Why Government Borrows



Sources of Government Borrowing 

As government debts were divided into external and internal debts, sources of Government borrowing is also divided into external and internal. External sources are loans that come from foreign countries while internal sources are loans that come from within the country.

national-debt

External sources of government borrowing include; multinational financial institutions like International Bank for Reconstruction and Development also known as World Bank and the International Monetary Fund (IF); other countries, foreign private fund, organisations, foreign state enterprises like British Airways, etc.

Internal sources of government borrowing include rich individual citizens, organisations, financial institutions like the Central Bank, Commercial banks, Development banks, Merchant banks, Mortgage banks, insurance companies, etc.

Reasons Why Governments Borrow 

1. To Finance Deficit Budget

When a government plans a deficit budget, it resorts to borrowing in order to finance it.

2. Fluctuation of National Income 

Government may decide to borrow when its total income earned over a period of time falls below expectation.

3. To Finance A Huge Capital Project 

Government of a country borrows in order to finance a huge capital project which the recurrent expenditure cannot finance.

4. To Procure War Materials 

There may be a need for government to borrow in a war period in order to procure materials with which to go to war.

5. Servicing of Loan 

Government sometimes borrows to enable it pay interest loans it obtained and to repaid debts that are due which is called funding operation. This is a process whereby a short-term debt is converted into a long-term debt.

6. To Provide Employment Opportunities

Provision of employment opportunities may drive government of a country to borrow either from local or foreign sources.

7. Emergency 

Loans may be obtained by government in order to combat natural disasters such as flood, drought, outbreak of diseases, etc.

8. Balance of Payments Disequilibrium

Many nations especially developing ones who suffer from deficit balance of payments borrow from IMF which is one of the aims for establishing the institution.