President Uhuru Kenyatta on Monday moved to woo Kenya’s lowest-paid workers with an 18 per cent wage increment that raises their purchasing power for the first time after two years of stagnation and decline.
Mr Kenyatta said the wage increase, made only three months to the August 8 elections, was in recognition of the fact that no such adjustments had been made in the past two years.
“For two straight years we have not increased minimum wages and after consultations with key stakeholders, I have directed that the minimum wage be increased by 18 per cent. In addition, we have increased the non-taxable bonuses and overtime to Sh100,000,” Mr Kenyatta said during the Labour Day celebrations at Uhuru Park in Nairobi.
This is the highest increase in the minimum wage since Mr Kenyatta took office four years ago. Observers see its timing as meant to woo the low-income voters paid ahead of the polls.
The latest wage increment means a general labourer in Nairobi, Kisumu and Mombasa, whose minimum is currently set at Sh10,955, will get an additional Sh1,971 for a total of Sh12,926. The entire amount is tax-exempt because an amendment of the income bands that moved the lowest taxable pay from Sh11,135 per month to Sh13,486.
The lowest-paid general labourers in other parts of the country will, however, earn Sh6,895 after the latest adjustments.
The increment has, however, moved more workers, including a Nairobi night watchman, who will now take home Sh14,420, a matatu turn boy (Sh13,960), heavy commercial vehicle drivers and tailors (Sh21,942) as well as artisans (Sh17,447), to the minimum taxable income threshold.
The low-income earners have been hardest hit by runaway inflation that now stands at 11.4 per cent, driven by increased food prices, weakening their purchasing power.
The 57-month high inflation has also eroded any income gains made in 2016 when the average inflation rate stood at about 6.3 per cent.
The Kenya National Bureau of Standards (KNBS) data shows that the inflation-adjusted pay — which is technically known as real wage, and is the real indicator of a rise or drop in the workers ability to purchase goods and services based on prevailing prices — dipped sharply from 10.7 per cent in 2013 to 2.9 per cent in 2015 and eventually to 0.1 per cent last year.
Mr Kenyatta, who was attending his third Labour Day celebrations having missed the event in 2014 and 2016, raised the minimum wages by 14 per cent in 2013 and later by 12 per cent in 2015.
Speakers at the Uhuru park fete called for the creation of more jobs for the youth amidst concerns that the economy was not generating enough employment to absorb the country’s labour force.
The Central Organisation of Trade Unions (Cotu) secretary-general, Francis Atwoli, said Kenya should focus on creating more jobs through initiatives such as the development of smart cities to minimise exploitation of Kenyan youths seeking jobs abroad.
“These agencies outsourcing our young men are exploiting them and we should not allow modern slavery of our people in the Arab world,” Mr Atwoli said, adding that the agents are fully paid for the service while those taken out there as domestic workers are persecuted.
Unlike last year, the event was attended by senior government officials, including Deputy President William Ruto and Labour secretary Phyllis Kandie.
The increase in minimum wage revives the long-running debate over the national wage bill which the President recently described as “one of the biggest challenges and threats facing the economy and national well-being”.
Mr Kenyatta said Kenya’s wage bill, which stood at Sh627 billion per year (50 per cent of the total revenues collected), was increasingly becoming a burden and a threat to development.
“In simple terms half of all the money collected as revenues in Kenya goes into the pockets of less than two per cent of the population,” Mr Kenyatta said in his March State of the Nation address.
He pledged to support recommendations by the Salary and Remuneration Commission seeking to rationalise salaries and allowances paid to senior State officers, public servants, and elected officials, with those elected in August this year expected to take a pay cut.