Kenyan workers in tight spot as pay trails inflation

President Uhuru Kenyatta. FILE PHOTO | NMG
President Uhuru Kenyatta will address Kenyan workers today as they mark the Labour Day. FILE PHOTO | NMG 

Kenyan workers’ salaries failed to match the consistent rise in cost of living during the past year leaving in its trail a purchasing power erosion that has dampened the mood as the country celebrates Labour Day and set the stage for battle over the minimum wage.

Official data shows that employees got a paltry 0.1 per cent growth in average take home pay in the financial year that ended on June 30 when the wages are adjusted for inflation.

The purchasing power erosion was especially deep for those in the bottom end of the earnings curve, who are grappling with a 57-month high cost of living of 11.48 per cent driven by soaring food prices.

The inflation-adjusted pay is technically known as real wage and shows a rise or drop in the workers ability to purchase goods and services based on prevailing prices.

Workers’ real average earnings have 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, indicating a general weakening of their purchasing power.

The slowdown in earnings growth came despite the easing of inflation, meaning companies were sluggish in increasing staff pay in the financial year ended June.

“Inflation decreased from 7.0 per cent in June 2015 to 5.8 per cent in June 2016, as a result, real average earnings grew marginally by 0.1 per cent,” says the latest Economic Survey.

The government did not adjust the minimum wage last year.

President Uhuru Kenyatta mid-last month, however, assured workers of a pay rise he is expected to announce today during the Labour Day celebrations.

Productivity levels

This is despite warnings from employers that the wage increases will further push up the high cost of doing business in the country and cause investor flight or trigger a fresh round of retrenchments to cut costs.

The employers, through the Federation of Kenya Employers (FKE), have argued that pay increments should not be limited to inflation but must be matched to productivity levels.

Kenya’s minimum wage stands at Sh10,955 a month for a general labourer in Nairobi, Kisumu and Mombasa, Sh12,221 for a night watchman and Sh18,595 a month for a driver.

The survey shows that public sector workers’ real average wages rose 0.5 per while their private sector counterparts saw theirs decline 0.1 per cent.

This means private sector employees generally experienced an erosion of their purchasing power in the year to June 2016, leaving them worse off.

In the public sector, the government frequently adjusts minimum pay for different professions mainly to honour collective bargaining agreements (CBAs).

This explains the marginal rise in civil servants’ real wages unlike private the sector employees who recorded a drop.

The fact that less than 80,000 or just about three per cent of formal sector employees in Kenya earn more than Sh100,000 per month means the majority of workers are barely surviving in prevailing conditions characterised by soaring rent, food and school fees.

The Kenya National Bureau of Statistics (KNBS) puts the number of formal sector employees earning more than Sh100,000 a month at 71,798, accounting for a paltry 2.8 per cent of the total 2.5 million workers in formal jobs in the year 2015.

Only 68,676 workers earned more than Sh100,000 in 2014. Last year’s figures are not yet out but KNBS officials said it is unlikely to rise past 80,000 workers or just three per cent of the formal sector workforce.

Official data shows that more than half of formal sector workers (60 per cent or 1.5 million employees) are living on low wages of between Sh20,000 and Sh49,000 that have barely increased in the past 10 years, eroding the wage earners’ purchasing power.

Financial and insurance sectors remain the best-rewarding with an average wage of Sh139,793 a month per worker in 2016, a 3.2 per cent increment from Sh135,370 a year earlier.

They are followed by energy sector workers whose average wage grew 4.5 per cent to Sh121,998 a month.

In real terms, however, the majority of private sector workers earned less last year than their 2015 take-home despite the salary increases that failed to match inflation.

Public sector salaries remain higher than private sector pay, with government employees earning an average of Sh56,923 per month compared to the private sector’s Sh52,443.

Overall, some 16 million people were in employment last year, out of which 13.3 million were in the informal sector and 2.6 million in formal employment.