A rally in prices of basic household items, including food, has left workers in a worse financial position in spite of a 12 percent minimum wage increase last year to help them cope with the high cost of living.
The Kenya Institute for Public Policy Research and Analysis (Kippra), a think-tank affiliated with the State Department of Planning, noted that instead, the minimum expenditure basket (MEB) rose by 22 percent in the review period, wiping out the gains of the increase in the minimum wage.
MEB captures what a household requires to meet basic needs – on a regular or seasonal basis – and its average cost.
These items include cereals such as maize grain, maize meal, wheat flour, and rice. Other foodstuffs it contains include beans, cowpeas pigeon peas, cooking oil, vegetables, milk, and sugar.
Non-food items contained in the MEB are water for drinking, cooking, and washing, kerosene, bar soap, education, and transport.
“While minimum wage increased by 12 percent in 2022, the cost of the minimum basket rose by an average of 22 percent,” reads the Kippra report.
“In addition, the minimum wage in Kenya only covers about half of the living wage. This amount is inadequate for a worker to afford a decent living,” it said.
President Uhuru Kenyatta in May last year ordered a 12 percent rise in minimum monthly wages despite protests from employers, in what was supposed to offer relief to workers who had gone for three years without a salary review.
The review saw the minimum pay for cashiers in major cities rise to Sh34,302.74 from Sh30,627.45, receptionists (Sh23,413.49 from Sh20,904.90), night security guards (Sh16,958.98 from Sh15,141.95) and salesman (Sh28,487.42 from Sh25,435.20).
However, inflation—a measure of the cost of living over 12 months—kept rising touching a five-year high of 9.6 percent in October as households grappled with higher prices of food and fuel.
High prices in the economy have been aggravated by drought, a depreciating shilling, and the war in Ukraine that has disrupted global supply chains and driven up costs of key raw materials such as fuel.
Thanks to improved weather, food prices have started going down pushing inflation to 6.7 percent in August.
Workers have, however, come under fresh pressure due to new tax measures on recently legislated taxation measures including the implementation of the Finance Act.
Provisions in the Act such as the doubling of VAT on fuel and the new housing development levy, charged at 1.5 percent of gross salaries and matched by employers, for instance, resulted in public petitions that threatened to derail the revenue mobilisation plan.
The IMF has recommended a staggered implementation of new tax measures by governments in sub-Saharan Africa, including Kenya, amid public backlash on the new revenue-raising measures.
The multilateral lender notes the sustainability of new policies is dependent on a government’s ability to win over public opinion.
“In general, the sustainability of new policies depends on the government’s ability to win over public opinion either by showing that reforms generate rapid benefits or by making a case for their desirability on longer-term grounds,” the IMF notes in a policy paper published on Thursday.