TSC, devolution drive public wage bill rise

Salaries for teachers and counties staff were the biggest drivers of the public wage bill increase in the five years to 2014, according to an analysis by Nation Newsplex.

Salaries paid out of the public purse have risen by 68 per cent over the last five years, growing from Sh249 billion in 2010 to Sh418 billion in 2014.

The entire wage bill grew at an average annual rate of about 14 per cent, with the highest year-on-year rise being between 2012 and 2013, when the bill grew 17 per cent from Sh321 billion to Sh375 billion. The largest increase coincides with the establishment of county governments that financial year.

In 2010, every Kenyan would have contributed Sh540 every month in order to meet the wage bill of Sh249 billion. By 2014, this share per Kenyan had risen to Sh811 per month.

Teacher pay grew by Sh57.9 billion over the five years while county government pay grew by Sh49.5 billion over the same period. The rise of county governments saw county government pay skyrocket by more than 300 per cent in a single year, from 12.8 billion in 2012 to 56.3 billion in 2013.

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Per year, public sector mean monthly earning has grown 10 per cent on average, faster than the monthly private sector mean wage, which has grown eight per cent, according to the analysis that was done jointly with the Institute of Economic Affairs (IEA).

Reflecting Kenya’s transition to two levels of government, from 2010 to 2013, the share of the wage bill spent on counties tripled, from five per cent to 15 per cent.

SLOWER PACE

This increase came at the expense of the national government, which spent a declining proportion of the total wage bill, from 26 per cent to 20 per cent. The decline could be attributed to devolved functions that the national government transferred to counties.

The drop in the national government’s share was, however, at a much slower pace than the growth of counties portion.

More than a third of the public wage bill is taken up by the Teachers Service Commission.

Excessively high public wages increase recurrent expenditure and reduce the amount government can spend on development according to the IEA.

High wages may also lead to unsustainably high levels of disposable income, orienting the economy towards consumption instead of investment and production.

TRIGGER BORROWING

Meeting a high wage bill may also trigger unsustainable borrowing.

Kenya’s wage bill can also be seen in terms of the burden it imposes on each citizen.

Kenyans are increasingly contributing towards payment of the country’s wage bill, the analysis shows.

In 2010, every Kenyan would have contributed Sh540 every month in order to meet the wage bill of Sh249 billion.

By 2014, this share per Kenyan had risen to Sh811 per month, or by 50 per cent over the five years, even as the country’s population rose by almost 12 per cent, from 38.5 million to 43 million.

Over this time, the public wage bill has continued to take up around eight per cent of the Gross Domestic Product, which is above the five per cent that is recommended for developing countries.

THE OIL MONEY THAT WASN'T

A 2014 International Monetary Fund report, Public Employment and Compensation Reform during Times of Fiscal Consolidation, found that the public wage bill to GDP ratio had risen in low-income countries.

This was expected, it argued, because of increased spending in necessary services such as education and health.

Although Kenya’s total public wage bill has been growing, it has dropped as a proportion of total expenditure since 2011, when it was about 27 per cent. It was 22 per cent in 2014.

In addition, the public wage bill as a share of total revenues and grants has also been dropping slightly since 2012, when it was about 40 per cent, to 2014 when it was 36 per cent.

This drop compares favourably to Ghana, which is often cited as a cautionary tale for high public wages.

The West African country was spending 55 per cent of revenues on wages in 2015, down from 70 per cent three years ago, according to a report from Reuters.

Ghana decided to increase pay for its civil servants after overestimating the revenues it would receive from oil, according to the Financial Times, only to face a crisis when the expected revenues failed to materialise.

In Kenya, the private sector may appear to pay better than the public sector at first glance, but in 2015, a review of wage data between 2010 to 2014 by Newsplex shows that public sector employees have on average been drawing higher wages than their counterparts in the private sector.

FIVE YEAR PERIOD

In 2010, on average workers in the public sector earned Sh34,000 per month, while workers in the private sector earned Sh33,000 per month.

Over the five-year period, the average wage for public sector workers increased by 47 per cent to Sh50,000 while the private sector increased by 36 per cent to an average of Sh45,000 per month.

This means that the gap between the average public sector pay and the average private sector pay is Sh5,000.

The share of wages spent on institutions where the government owns half or more of shares has stayed between 11 and 13 per cent.

When compared with its neighbours and other countries in Africa, Kenya has a lower wage bill to GDP ratio than the West African countries of Ghana (12 per cent) and Nigeria (nine per cent), but a higher one than Tanzania (seven per cent), Uganda (five per cent), Rwanda (three per cent) and Ethiopia (two per cent).

A higher wage bill to GDP ratio may lead to suspicion of waste or overly generous perks paid to the higher echelons of the public service.

On the other hand, a lower wage bill to GDP ratio does not necessarily mean the public service is more efficient. In fact, it could mean public servants in crucial fields are underpaid and unable to press for better conditions of service where unions are weak.

The public sector wage bill comprises the regular payroll expenditure such as basic salary, house allowance, and all other allowances payable to public servants.

It also includes other personnel-related expenditure, which is not paid on a regular basis, such as fees, commissions and honoraria, refund of medical expenses, and other personnel benefits.