Real wages stagnant since 2010


Real wages stagnant since 2010

Despite a larger economy, Kenya's middle class is hardly growing.

Real monthly incomes have stagnated since 2010, a review of employment data reveals.

In 2010 the real average monthly income was Sh31,212 but it dropped by one per cent to Sh30,862 in 2014 finds the analysis by Nation Newsplex.

Real wage is the income of an individual after taking into consideration the effects of inflation and purchasing power.

A person earning the average wage has to work for 23 minutes to afford a 2kg packet of Unga

For example, if you got a three per cent salary rise over the previous year and inflation for the year was two per cent then your real income only rose one per cent. Inversely, if you received a two per cent raise in salary and inflation stood at four per cent then your real income would have shrunk two per cent.

However, in nominal terms, the monthly wage increased from Sh32,963 in 2010  to Sh46,265 in 2014, a rise of 40 per cent.

A person earning the average wage has to work for 23 minutes to afford a 2kg packet of Unga, which costs about Sh110, while an individual who is in the lowest wage bracket, earning  Sh9,999, has to work for at least one hour and 42 minutes to buy the same packet of Unga. Someone earning the minimum amount within the highest wage bracket, Sh100,000 can buy the same packet after working for 11 minutes.

The income data for the five years to 2014 shows that employees in public sector earn a higher wages compared to their counterparts in the private sector. During this period, the average real wage for public sector employees has been Sh31,574 compared to Sh29,086 for the private sector. This implies that for every shilling that a private sector employee earns in real term his or  her public sector counterpart is earning eight cents more.

After rebasing its economy in 2014, Kenya was classified as a lower middle income economy. The Kenya National Bureau of Statistic data indicates that GDP per capita (constant prices) moved up 11 per cent, from Sh80,689 in 2009 to Sh89,241.

BETTER GOVERNANCE

Despite a larger economy, Kenya's middle class is hardly growing. The analysis found that going by real income, the share of employees in the formal workforce who fall within the middle class, those presently earning between Sh76,894 and Sh109,324, have increased minimally.

In 2014, 10 per cent of all employees in formal employment were in the middle class.  The middle class grew by one per cent from 2009 when nine per cent of all workers were middle class.

According to economists, a strong middle class provides a stable consumer base that drives productive investment.  A vibrant middle class is essential for strong entrepreneurship and innovation and reduces transaction costs. It is also a mainstay of civic engagement that produces better governance, and promotes long-term investments.

The review, which was done jointly with the Institute of Economic Affairs, defined the  middle class as those earning not just the average income, but also one and two standard deviations above the average income.

Only three per cent or about 71,000 employees in the formal sector earn Sh100,000 or more per month. Another 23 per cent or 545,000 employees are paid between Sh50,000 and Sh99,999.  

The most common wage earned is between Sh30,000 and Sh49,999, by about 664,000, or 28 per cent of all employees. Nearly 20 per cent or 474,000 employees earn from Sh25,000 to Sh29,000 while  16 per cent or about 379,230 employees earn from Sh20,000 to 24,999.

Seven per cent or about 166,000 of wage employees earn between Sh15,000-Sh19,000.

The formal sector employs about 2.4 million Kenyans or 17 per cent of the labour force.