Economy

Counties pay exceeds salaries in companies

governors-pic

Council of Governors (COG) Chairperson Martin Wambora on June 23, 2021. PHOTO | LUCY WANJIRU | NMG

Average monthly pay for county workers last year surpassed that offered to private sector employees, aided by higher annual salary increments in the devolved units.

The counties increased average pay by 7.61 percent to Sh72, 301 from Sh67,191 the year before, beating private firms whose earnings rose 2.24 percent to Sh69,103.

The findings of Economic Survey 2022 show average earnings in the counties grew faster than the 6.3 percent average inflation rate — making them the only segment of employees whose purchasing power was not eroded by the rising cost of living.

Teachers, and national government and parastatals employees are on the list of those whose real wages, adjusted for inflation, were in the negative last year following resistance to increase salaries.

Teachers’ average pay rose 1.84 percent while that of parastatal workers and national government employees increased 0.88 percent and 0.49 percent respectively.

Kenya froze salary increments for all civil servants for two years, starting July last year following a deal agreed with the International Monetary Fund (IMF) to keep pay unchanged until 2025.

The pay freeze is expected to help rein in public sector salaries to free up cash for projects such as building roads that ultimately create jobs.

Private sector employers are warning it will take years for pay raises to return to pre-pandemic levels, with firms fretful of business uncertainties despite the economic rebound following the easing of measures aimed at curbing the spread of Covid-19.

They say real wages, adjusted for inflation, will take longer to recover from the pandemic-induced economic contraction in 2020.

This means that disposable incomes will fall in 2022 as rising inflation and tax increases hit families, posing a headache to the State in an election year.

The Federation of Kenya Employers (FKE) said workers’ compensation to cover inflation will resume when productivity starts growing faster than the cost of living measure.

FKE executive director Jacqueline Mugo said productivity in Kenya was “not just low, but is actually decreasing”, citing findings of the 2022 Economic Position Paper on Wages by the Ministry of Labour.

Consumer inflation rose to 6.47 percent year-on-year in April from 5.56 percent a month earlier, data from the statistics office showed, slowing consumer demand.

“Domestic demand fell, driven by reduced client spending following significant increases in food and fuel prices,” Kuria Kamau, fixed income and currency strategist at Stanbic Bank #ticker:SBIC said.

The higher counties’ pay comes despite the devolved entities struggling to grow internal revenues and delaying payments to suppliers worth billions of shillings.

Labour economists say increased spending by the government on workers’ pay is the result of an evolution in the job market that has put the public sector in direct competition with the private firms for skilled workers.

State think-tank Kenya Institute of Public Policy Research and Analysis (KIPPRA) said that allowances paid to civil servants have made the government the preferred employer and called for a radical review.

Currently, allowances have the effect of doubling employees’ pay and in some instances growing it by a factor of 10.

The first crop of workers under the counties following the 2013 elections earned an average of Sh50,293 per month.

This means that their average pay has increased 44 percent since Kenya rolled out the devolved system of government to try to hasten rural development and have more decisions made at the local level.

Salaries for corporate Kenya employees and national government workers have increased 65 percent and 68 percent respectively over the nine years.

Governors have gone on a hiring spree since 2013, more than tripling the county governments’ wage bill in what has derailed efforts to curb the ballooning public service salaries.

Kenya’s public sector wage bill stands at 50 percent of annual government tax revenue.

The IMF puts the global benchmark at about 35 percent.

The ballooning wage bill has forced counties to squeeze funds for development projects and increased reliance on the Treasury for cash transfers amid perennial misses in their internal revenue collection targets.

County governments have previously argued that the hiring was necessary as most of the employees they inherited from the defunct local authorities were unskilled hence the need to employ technical people.

Official data show that 30,000 workers have been added to the counties’ payrolls over the last four years.

This is in contrast to the national government, which increased its workforce by 14,000 in the same period, helped by a hiring freeze in non-essential departments.

The freeze in non-essential hiring and pay in government sets the stage for tough times ahead as costs of basic items such as fuel, rent and food continue to spiral.

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