Workers’ hopes high even as employers warn of job losses

Alvin Odinga is a construction worker at a site in Westlands. With a daily income of Sh300, he lives on the hope of a better tomorrow.

The steady increase in food and fuel prices in the last few months has hit him hard since his wage remains the same.

On Sunday, he will walk for more than ten kilometres from his Kawangware home to mark Labour Day at Uhuru Park with great expectations.

He hopes the government will announce a wage increase to help ease his financial burden.

“It is high time the government increased the wages of workers across the board. You will find that in recent times, life has been made difficult by the increase in fuel and food prices. I personally earn a meagre Sh300 a day, which cannot sustain me, let alone my family,” said Mr Odinga.

Cushion citizens

At Uhuru Park, thousands of workers will have their hopes lifted following the announcement by Prime Minister Raila Odinga that the minimum wage would be increased to cushion citizens from the rising costs of fuel and food.

How significant this increase will be remains to be seen. As late as yesterday evening, the government was noncommittal as to who between the President and the Prime Minister would attend the workers’ day ceremony.

The plan to announce a minimum wage increase as demanded by trade unionists has caused anxiety among employers and manufacturers who argue it could lead to massive job losses.

The Prime Minister told Parliament on Wednesday that the increase of the minimum wage to be announced today was one of a raft of measures the government was undertaking to cushion the poor.

After two years

“It should be recalled that the minimum wage was increased by 10 per cent last year. The government has agreed to further increase the minimum wage. Such increment should have come after two years, but we will do it now to address the sharp rise in the cost of living.
“Going forward the government intends to shift from cost of living wage adjustments to productivity based wage adjustments.  Resources are being provided by the ministry of Labour to set up a productivity centre,” said Mr Odinga.

A Synovate opinion poll released two weeks ago shows that 33 per cent of Kenyans cite the price of food, cost of fuel and poverty as their main concerns.

The poll was released a day after the Energy Regulatory Commission, in its monthly review, announced new fuel prices that pushed a litre of petrol to an all time high of Sh111, diesel at Sh107 and kerosene at Sh90.

The move prompted the government to announce a cut back on diesel and kerosene taxes in order to cushion the poor, farmers and manufacturers.

The increased cost of fuel has raised Kenyans’ cost of living due to a spiral effect on food and commuter prices.

But the promise of raising minimum wages as announced in Parliament is already drawing resistance from manufacturers and employers.

Manufacturers have told the government it would be futile to increase minimum wage with the hope of cushioning workers from rising prices, saying this would push firms to freeze employment and adopt automation.

The Kenya Association of Manufacturers (KAM) says the high salaries would reduce demand, consumers would buy fewer goods and companies would earn less.

KAM chief executive, Betty Maina, said that instead of increasing the minimum wages, the government should work out ways of increasing consumers purchasing power without increasing wages.

Ms Maina said because of the current high wage, most companies are making huge capital investment in automation to ease pressure on wage bills.

Cost of electricity

The business environment is also made harder by high taxes, with manufacturers paying 56 per cent of their earnings as taxes and other forms of levies, she said.

Ms Maina said cost of electricity and its quality due to unreliable supply, also bothers manufacturers.

In the last one month alone, she said members reported 8,400 outages, or unscheduled power cuts, which resulted in loss of business hours and in some instances, damage to equipment.

Additionally, the PM said the government will re-launch the Kazi Kwa Vijana programme, and continue with most of the Economic Stimulus Programmes.

The KKV II (Kenya Youth Empowerment Programme) will be implemented jointly with the World Bank. Under the programme, the World Bank is providing about Sh4.8 billion for the initiative.

The measures announced in Parliament and some of whose details will be announced on Sunday was a government response to a national outcry from families and workers, their costs of living pushed up by rising costs of fuel and food prices.

According to Raila, the country is currently under an economic strain resulting from a rise in global oil prices.

He gave the example that the country spent $2.9 billion to import oil in the last one year. The previous year, the country spent about $2.2 billion.

In Parliament, he announced measures by the government to cut back tax on diesel and kerosene. The cuts are targeted mainly at industries, farmers and households who use kerosene to cook.

“To provide immediate relief from the high food prices, we are doing two things. One is to expand famine relief to cover four million people up from the 2.4 million people covered currently. Second is to roll out the programme that will provide cash via M-Pesa to the poor and vulnerable to help them buy food. The latter will be a permanent feature of the government’s social protection programme. Relief will be provided from July this year,” Mr Odinga said.

The cutback in fuel taxes to cushion the poor is also due to affect Treasury coffers.

Kenya Revenue Authority Commissioner-General Michael Waweru said the fluctuating shilling and uncertainties in foreign exchange rates, as well as rising inflation cut collections.

The agency has set a target of Sh641.2 billion for the whole year, 20 per cent more from Sh534.4 billion in 2009/10.

“The rising food and fuel prices coupled with declining activities at the Nairobi Stock Exchange are expected to adversely affect revenue performance in the fourth quarter,” Mr Waweru told the Sunday Nation.