Mixed fortunes for Kenyan workers under Jubilee rule

Kenyan workers Sunday got no adjustment on minimum wages from the Jubilee administration under which they have had mixed fortunes of average wage growth and stagnation in the past three years.

The Presidential speech read by Labour secretary Phyllis Kandie during the Labour Day celebrations at Uhuru Park in Nairobi didn’t mention wage increase, leaving the formal sector workers’ average earnings static. With the average inflation rate standing at 5.27 per cent, this means there will be no change in their purchasing power.

Inflation-adjusted average wages per worker in the formal sector remained unchanged at Sh30,862 per month in 2014, according to the latest official data -- leaving workers with no extra room for increased spending or saving.

The Kenya National Bureau of Statistics (KNBS) explained in the Economic Survey 2015 that the near stagnation in average wages was linked to a rise in inflation rate during the period under review,  coupled with only marginal salary increments.

Kenya’s cost of living rose to 6.9 per cent in 2014 from 5.7 per cent in 2013, cancelling the nominal average wage increase from Sh41,672 to Sh44,807 during the same period.

The stagnation in real wages in 2014 was in sharp contrast to 2013 –the first year of the Jubilee coalition’s government — when workers recorded one of the largest gains in recent years. Real average wages in 2013 jumped 11 per cent to Sh30,723 per month from Sh27,765 in 2012.

The double-digit increase was the result of 18 per cent average wage increment to Sh41,672, beating the prevailing inflation rate that  declined from 9.4 per cent to 5.7 per cent in the same year.

KNBS noted that the relatively weaker performance in 2014 was also driven by the government’s decision not to increase the minimum wage that year.

READ: Kambi dashes workers hopes for pay increase

Also read: Uhuru orders 14pc rise in minimum wage

The statutory pay rise acts as a floor for formal sector earnings whose revision  has the effect of ramping up compensation for workers in the higher rungs of the income ladder.

During last year’s Labour Day celebrations, the government announced a 12 per cent increase in the minimum wage, a move that is expected to have caused a general rise in 2015 wages when KNBS publishes data on labour market performance for that year later this month.

Workers’ unions, led by the Central Organisation of Trade Unions (Cotu), have consistently pushed for double-digit increases in the minimum wage, citing the need to protect workers from inflation.

Productivity

Employers on the other hand have argued against entrenching a culture of raising the minimum wage each year, rooting for a formula that would allow individual organisations to compensate employees based on productivity while also factoring in the overall cost of doing business.

The rate of inflation, which has stayed in the single digits this year on account of lower fuel and food prices, is a powerful argument for employers rooting for zero or marginal wage increments.

The cost of living last month fell to a new record low of 5.27 per cent, boosting workers’ spending power and giving employers an upper hand in any upcoming negotiations for wage increments.

The Jubilee government in 2013 raised the minimum wage to 14 per cent, pushing the average minimum pay in urban centres to Sh12,136 per month compared to Sh10,646 in 2012.

For workers paid above the minimum wage, growth in wages has primarily been driven by competition for skilled talent and the growing power of unions that negotiate better terms through collective bargaining agreements (CBAs).

A total of 328 CBAs were registered by the Industrial Court in 2014, covering 90,856 employees who were entitled to an average monthly basic pay of Sh32,210 and an average monthly housing allowance of Sh5,700.

That was a slight increase from the previous year when 293 CBAs covering 380,103 workers were registered giving qualified beneficiaries an average monthly basic salary of Sh31,988 and an average monthly housing allowance of Sh6,700.

Workers in the retail sector have been among the biggest beneficiaries of the CBAs where the total pay of a section of workers at major stores like Tuskys and Nakumatt Holdings have topped the Sh30,000 mark.

Newly-employed cashiers at Tuskys, for instance, have seen their basic monthly pay rise to Sh26,889 from Sh24,898 following a new CBA the retailer signed with the Kenya Union of Commercial, Food and Allied Workers (Kucfaw) in March.

The amount will rise further to Sh29,041 next year, according to the CBA which covers two years.

Financial services sector managers have on the other hand emerged among the top beneficiaries of talent wars where highly qualified employees are lured by larger salaries and bonuses.

This fight for top talent and the profitable nature of the financial sector has seen bankers, insurers, asset managers, analysts and investment advisors rank as the highest paid professionals in the private sector with an average monthly pay of Sh125,000 as of 2014.

While labour earnings look set to rise in the near term, they  will only benefit workers who will remain in a labour market where retrenchments has become a common feature.

Kenya Fluorspar Limited and Standard Chartered Bank Kenya are among the firms that have recently cut jobs in response to depressed earnings.

Kenya Revenue Authority (KRA) has attributed the fall in payroll taxes (PAYE) to a mix of retrenchments, suspension of salary increments and a hiring freeze, capturing the bleak outlook for workers.

vju[email protected]