Budgetary trade-offs in minimum wage adjustments: A Nigerian Case Study through the Lens of Cooperative Game Theory and Shapley Allocation

This study examines the budgetary trade-offs inherent in minimum wage adjustments in Nigeria and their implications for human capital development, fiscal sustainability, and macroeconomic stability. Employing a cooperative game theory framework, with the Shapley value as the solution concept, the research models the strategic interaction between labour unions and the government during wage negotiations. The analysis demonstrates that cooperative bargaining yields Pareto-superior outcomes for both parties and the broader economy, in contrast to prolonged non-cooperation, which aggravates fiscal strain, fuels inflationary pressures, and undermines human capital. Findings indicate that Nigeria’s current fiscal constraints and limited revenue capacity are insufficient to sustain an unrestricted living wage without inducing significant macroeconomic distortions. Consequently, the study advocates for institutionalizing a permanent tripartite negotiation mechanism, conducting rigorous ex-ante fiscal impact assessments, and enhancing domestic revenue mobilization. These measures are proposed to facilitate sustainable minimum wage adjustments that equitably balance worker welfare with fiscal affordability and economic stability.