Private sector salaries growth at 11-year low


Federation of Kenya Employers (FKE) executive director Jacqueline Mugo. FILE PHOTO | NMG

Average earnings for workers in the private sector grew at the slowest pace in 11 years, as firms resumed hiring and kept a lid on wage costs in a recovering economy.

The findings of an annual economic survey by the Kenya National Bureau of Statistics (KNBS) show private companies raised average monthly pay by 2.24 percent to Sh69,102 last year compared with 3.97 percent to Sh67,585 the year before.

This is the slowest growth in monthly pay since 2010 when average salaries rose 2.04 percent to Sh32,713.59.

This is a blow to workers grappling with a sharp jump in the prices of essential items, including soap, cooking gas and fuel.

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.

The rebound, which saw Kenya record the fastest growth in 11 years, led the economy to create the highest number of jobs in six years, a boost to the more than one million young people who graduate from colleges and secondary schools.

A total of 926,100 jobs were added in both formal and informal sectors last year, the highest since 2015 when 929,000 employment opportunities were created.

Employers 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.

The real wage last year stood at negative 3.83 percent after inflation adjustments, down from negative 0.59 percent in 2020.

FKE executive director Jacqueline Mugo, however, 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.

“Until the global political developments affecting supply chains and the challenging situation for enterprises in Kenya improve, employers are not in a position to unilaterally increase wages in real terms,” Ms Mugo told the Business Daily in a recent interview.

“Employers in Kenya are struggling and still grappling with the negative impact of the Covid-19 pandemic. The situation of companies is being worsened by the disruptions in the global supply chains as a result of the ongoing geopolitical conflicts.”

This is emerging after official data showed the economy grew 7.5 percent last year, compared with a contraction of 0.3 percent in 2020.

The prices of essential items, including soap, cooking gas and cooking oil as well as food items such as wheat flour and onions, have risen by up to 41 percent in the past year.

This has forced many households, especially in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from the Covid-19 economic hardships.

The rise in the cost of essential commodities could force workers to cut back on non-essential items such as beer and airtime, ultimately hurting firms like East Africa Breweries Limited (EABL) #ticker:EABL and Safaricom #ticker:SCOM .

Cooking oil prices jumped the highest in April, with a litre averaging Sh351.99, a 41.66 percent climb compared from the cost a year ago, the KNBS data shows.

It was followed by cooking gas for which refilling a 13-kilo cylinder cost 38.18 percent more to an average of Sh2,866. The price of a two-kilo packet of wheat flour jumped 24.72 percent to Sh160.70.

The KNBS data shows monthly wage increment was highest in accommodation and food services, whose workers were amongst the hardest hit by the pandemic, at the rate of 4.6 percent to Sh37,393.68.

It was followed by education where employers raised average nominal monthly salaries by 3.06 percent to Sh84,223, mining (2.5 percent to Sh55,512.51) and manufacturing (2.16 percent to Sh47,530.92).

Workers in agriculture, which contracted 0.2 percent due to bad weather, had the slowest raise on average monthly pay at the rate of 0.3 percent to Sh31,393.68 followed by construction at 0.77 percent to Sh63,693.73.

Workers in transportation on average got a pay raise of 1.2 percent to Sh128,010.81, energy 1.2 percent to Sh173,103.54, real estate 1.24 percent to Sh27,280.03 and financial services 1.42 percent to Sh173,505.61.

The rising cost of living prompted President Uhuru Kenyatta this month to raise the legal minimum wage by 12 percent, marking the first increase since 2018 despite opposition from employers.

“There’s no question that the cost of living throughout the globe has shot through the roof as a result of Covid-19 and consequently … conflicts that are ongoing in Ukraine and Russia,” Mr Kenyatta told workers on Labour Day last Sunday.

“But we here in Kenya have taken measures that we consider sustainable. We know people would want more, but we can only do that which is sustainable …and can afford to cushion the vulnerable including workers, and our farmers, especially on the cost of inputs.”

The Treasury has allocated Sh5.7 billion to fertiliser subsidy for small-scale farmers for the current main crop planting season after supplies from Russia were cut off because of sanctions, with a further Sh1.5 billion budgeted for the October-December short rainfall period.

It had released Sh49.164 billion by April 14 under the pump prices stabilisation scheme, which started in April last year to reduce the price of the essential commodity whose cost has been exacerbated by Russia’s invasion of Ukraine.

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