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Great myth of increased minimum wage

Thursday May 7 2015

Cotu Secretary-General Francis Atwoli. PHOTO | BILLY MUTAI | NATION MEDIA GROUP

Cotu Secretary-General Francis Atwoli. PHOTO | BILLY MUTAI | NATION MEDIA GROUP 

President Uhuru Kenyatta announced a 12 per cent increase in the minimum wage for Kenyan workers during the last Labour Day celebrations at Nairobi’s Uhuru Park.

The Central Organisation of Trade Unions had demanded a 20 per cent increase to cushion workers from the prevailing high costs of living.

Kenyan workers last got a minimum wage increment in 2013, when their wages went up by 14 per cent. Last year, sustained lobbying by the employers’ federation ensured that there was no pay rise.

While this year’s 12 per cent increase appears large when viewed as a percentage, it is small in absolute terms and completely disappears when viewed objectively.

The rise in the minimum wage means that the least paid urban workers will see their minimum pay rise to between Sh13,592 (other towns) and Sh17,199 (Nairobi, Mombasa, Kisumu) from between Sh12,136 and Sh13,357. The least paid agricultural worker will earn Sh6,780 from Sh6,054 , while unskilled workers will earn Sh5,436 from Sh4,854.



Some people have described the pay rise as a step towards improving the welfare of workers. Others have dismissed it as a drop in the ocean as it brings to the fore a pertinent question: is it enough to cushion workers from the prevailing high cost of living? Economics teaches two closely related concepts that can help us understand this better; inflation and the consumer price index (CPI).

Inflation is the general upward movement in the price of goods and services in an economy. Kenya’s inflation rate rose to an eight-month high of 7.08 per cent in April, up from 6.31 per cent in March.

The CPI is a measure of the average change in the price paid by typical consumers over time for a basket of retail goods and services. CPI can be used to identify periods of inflation or deflation, making possible a factual analysis on whether this latest wage increment adds up.

The CPI of April 2013 was 139.28, with the index for April 2015 standing at 158.70, according to figures from the Kenya National Bureau of Statistics.

Calculations reveal that the cumulative inflation between April 2013 and April 2015 stands at 13.94 per cent. This means that the price of goods and services has risen by an average of 13.94 per cent since May 2013, when the last wage increase was effected.

This has been matched by a 12 per cent increase in wages. Therefore, there has been a decline in real wages for the Kenyan worker over the past two years. His lower salary two years ago could purchase more goods than his increased salary now.

In real terms, the Labour Day announcement was not a minimum wage increase but an attempt to restore the income of the lowest paid workers to where it was two years ago.

Kenyan workers’ struggle for fair pay and humane working conditions has been a long and treacherous one, stretching back to the pre-independence era. Kenya should pay its workers better if we are to achieve the increased productivity we hope for. A good starting point would be a genuine wage increase.

The writer is an advocate for social and economic rights and an organiser at Kenya For Tax Justice. Twitter: @Sungu Oyoo