Economy

Low wages up amid formal earnings growth

uk

President Uhuru Kenyatta speaks during Friday’s Labour Day fete. The government increased the minimum wage by 12 per cent. PHOTOS | JEFF ANGOTE

President Uhuru Kenyatta’s decision to increase the minimum wage after a two-year break looks set to reverse the drop in pay increases witnessed last year.

Mr Kenyatta defied pressure from employers to increase the minimum wage by 12.5 per cent during Friday’s Labour Day fete.

This came after official data released on Wednesday indicated that average annual formal sector earnings grew by 7.9 per cent from Sh42,855 to Sh46,264 last year, leaving workers in a neutral purchasing power position since average inflation stood at 6.9 per cent.

The wage growth was less than half the 16.1 per cent recorded in 2013 when the average inflation rate stood at 5.7 per cent.

The Kenya National Bureau of Statistics said the lower average wage growth was due to the government’s decision not to increase the minimum wage in 2014.

In 2013, the government reviewed the minimum wage by 14 per cent, up from 12.5 per cent in 2012.

The Federation of Kenya Employers (FKE) maintains that Kenya has the highest minimum wage among East Africa Community members, adding that the country has focused more on the cost of living measure (inflation rate) over workers’ productivity while making the increments.

READ: Employers campaign against May 1 minimum wage review

But labour unions have been demanding increments to help their members cope with soaring prices, especially of food, fuel and housing.

Governments in the developed world, including the US, Germany and Britain, are pushing for raising of minimum wages in their countries to compensate for stagnant pay for much of the past decade

In Kenya, each region and occupation has a set minimum wage. A night watchman in Nairobi, before the latest review, was expected to earn a minimum salary of Sh10,910 per month compared to Sh10,115 in smaller towns.

Failure to adhere to guidelines on minimum wage is a criminal offence and employers in breach face a fine of Sh50,000 or three months imprisonment.