Think beyond wages to tame rising cost of living

As Kenya prepares to commemorate the gains made by workers on Labour Day next week, many are hoping that the government will announce a pay increase.

But the Federation of Kenya Employers says employers are unlikely to add the minimum wage on May 1 due to depressed earnings, owing to a harsh economy.

Although the high cost of living warrants a pay hike, we appeal to the players to weigh their decisions carefully. First, we advise against any pronouncement on a blanket pay increase across the economy because not all sectors have recovered from the pandemic.

A few sectors such as banking are recoding profits while others like tourism are seeing a marginal growth that cannot comfortably accommodate a big jump in salaries. Last year, banks recorded 53 percent profits increase on economic recovery.

The easing of restrictions triggered a gradual recovery in the economy, prompting financiers to boost lending amid repayment of defaulted loans.

Therefore, sensitivity to a sector's growth is key. Let the government leave the pay increment issue to employers, who no doubt appreciate the value of their staff and understand how the high cost of living is affecting them.

In most homes, overall incomes declined during the pandemic, with the biggest proportion taken up by food purchases. The periodic price spikes in basic commodities continue to squeeze the households’ budgets.

Workers earning minimum wages last received a five percent increment in 2018, yet the cost of food and fuel has skyrocketed.

Therefore, if an organisation is doing well, it should compensate the workers adequately.

Secondly, let the government not focus on wages alone to help to reduce inflationary pressures.

The cost of food can be brought down by unlocking the potential of irrigation agriculture to transform production and reduce overreliance on expensive and scarce imports.

For instance, cooking oil prices are set to rise by about 15 to 20 percent as Indonesia bans palm oil exports. Even if the minimum wage were increased, many Kenyans would still not be able to afford the commodity.