Informal sector workers miss out on minimum wage awards

Kenya’s informal sector workers suffer poor remuneration despite the government’s effort to improve their plight with the setting of a minimum wage, a new survey has revealed.

Four out of every 10 workers in the informal sector are earning less than Sh6,000 per month – raising questions over the effectiveness of minimum wage policies.

The survey - ‘Critical success factors for a micro-pension scheme’ - also shows that 65 per cent of the workers in the sector earn less than Sh12,000 per month. The survey was done by the Retirement Benefits Authority and the United States International University in May this year.

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Under the minimum wage guidelines gazetted last month, the lowest paid worker with hardly any skills should earn Sh8,580 in cities, Sh7,915 in the municipalities and suburbs just outside Nairobi and Sh4,577 in all other areas.

It means that those who earn Sh6,000 and below in the cities and municipalities, which have the majority of informal sector businesses (popularly referred to as jua kali), are grossly underpaid.

Trade union leaders pointed to the difficulty in recruiting informal sector workers to join collective bargaining associations saying the workers are often intimidated and even sacked at the mere mention of getting into arrangements that could demand payment of the minimum wage.

“We are aware that minimum wage legislation is not being applied in the informal sector and have been trying to recruit workers in the sector but they are often intimidated or even sacked if found,” said Ernest Nadome, a Cotu national board member, who also represents unionised electrical and allied workers.

Mr Nadome said between 80 to 90 per cent of the workers in the sector are not unionised due to resistance of the workers fearing victimisation.

He said that before a recognition agreement can be made between the employer and the union, the union is required to submit evidence that at least 51 per cent of the unionisable workers are willing to join it.

“But it never reaches that point. Once the union submits the list to the employer, it is used to identify the workers who are then intimidated or sacked leaving their earnings intact,” said Mr Nadome.

Other opinion leaders, including formal sector employers and experts, said it was unrealistic to expect the informal sector to strictly adhere to minimum wage levels when they are struggling to survive difficult market conditions.

“In the formal sector, we encourage the companies to pay the minimum wage because of the need to respect the law and not risk heavy penalties and injury to their reputation. But in the informal sector, people are merely trying to survive. If you raise the standards too high, you wipe out jobs,” said Jacqueline Mugo, the CEO of the Federation of Kenya Employers.

Ms Mugo said the level at which the country has pegged minimum wages may be too high for the informal sector, given that they are the largest creators of jobs and their workers are just trying to make ends meet.

She said the minimum wage guidelines are the major reason that many employers, even in the formal sector, have been trying to find way to minimise recruitment.

Kenyatta University-based labour economist Jacob Omolo said Kenya needs to strike a compromise between strict regulations on minimum wages for the informal sector and the desire to nurture enterprises that could drive industrialisation.

“Minimum wage legislation is supposed to be applied to all sectors of the economy whether private or public. The informal sector does not really respect the provisions on minimum wages but the labour inspectorate is so understaffed that it cannot enforce the law as it should,” said Dr Omolo.

Noting that the international standard is for one inspectorate staffer to 40,000 workers, Dr Omolo said the situation as at the end of 2010 in Kenya was one staffer for 121,750 workers – leaving the ministry incapable of enforcing minimum wages.

“The situation now must be worse because staff numbers may have remained the same or dropped due to natural attrition while the total number of workers has definitely increased,” said Dr Omolo.

The economist said the required support for the inspectorate include office supplies, vehicles, technical or capacity training was limited by the budget allocated. The survey also found that most informal sector employees are aged between 18 and 35.

This is the same age bracket that is targeted under the government’s youth employment programmes.

The survey showed minimal participation, 8.9 per cent of the total labour force including owners, in the jua kali sector by people aged above 47 years.

The research concluded that low income is the reason many informal sector workers are not participating in pension schemes.

The survey involved 1,083 participants in the sector using a sampling frame provided by the Kenya National Federation of Jua Kali Association, which brings together groups of registered members.

girungu@ke.nationmedia.com