Cutting salaries is the wrong way to lower Kenya’s wage bill

Two weeks ago, President Kenyatta made an address to Parliament, laying out the achievements of his administration.

Towards the end, the address highlighted public sector wage growth as the main challenge to fiscal balance in Kenya, and thanks to media coverage, the undeniably bold solution that he proposed has public support. However, legislators did not seem so enthused.

In summary, the President agreed with proposals by the Salaries and Remuneration Commission (SRC) to reduce wages for legislators and some holders of State offices. However, the President will find the issue of trimming wages a lot more complicated than the declaration suggested.

Three years ago, the SRC hosted a national conference to commence national dialogue on public sector wages. I participated in that conference in the belief that transparent discussion would create the public support the Executive needed to force the Legislature to accept capping of wages, among other reasonable proposals that the SRC proposed.

Later, legislators demanded the intervention of the Executive, and not only got higher wages to compensate for payment of taxes, but also an illegal approval for subsidised car loans.

TWENTY PER CENT

Members of County Assemblies (MCAs) noted this development, and in turn, visited the President at the Coast to press their own demands for bigger wages, allowances and car loans. There was no political cover for the SRC, and it subsequently cowered.

Owing to that, and the doublespeak by the Executive about favours for legislators and MCAs, the quest to manage public wages floundered.

The only feature that endured was the symbolic but meaningless policy of a 20 per cent wage cut for the President and selected cabinet secretaries, and even this policy stands on dubious ground because the Constitution does not contemplate a reduction in the wages of the President and selected State officers.

So, based on the disappointing results of the last conference we had, another conference on managing public spending would be futile.  

Managing public wages is complicated by the nature of Kenya’s public sector and the distribution of numbers within it. While individual senators, judges, cabinet secretaries and the members of the National Assembly earn wages far above the national average, they all constitute less than 10 per cent of all public sector employees. Thus, any obsession with reducing legislators’ wages is unlikely to solve Kenya’s wage growth problem.

ARCANE JUSTIFICATIONS

Parliament’s share of all spending in 2016 was less than two per cent of all national spending and constituted less than a week of tax collection. This means that even if the individual wages of each legislator were reduced by half, overall savings would be significant but still small, relative to total spending of more than two trillion Kenya shillings.

Really substantial savings will only be made by controlling all allowances that public sector employees claim, because discretion on this issue creates massive abuses, as the audit reports reveal.

If only one policy reform on wages is to be implemented, it must be a sharp reduction in the number of allowances that professionals in the public sector can claim, in addition to a yearly cap on that entitlement.

The SRC says it has reviewed allowances, but the Collective Bargaining Agreement (CBA) signed with medical practitioners alone had more than seven different heads of allowances, each with its own arcane justifications.

If allowances are not standardised and limited at the public sector level, the problem will remain.

JUDGES IN PUBLIC BUSES

Separate from allowances are the privileges that State officers have claimed as a right. Kenyans visiting different countries mention how they routinely meet State officers from those countries, such as judges, in public buses, trams and metro systems.

These claims are not apocryphal, and the idea that every mid-level public sector employee has a luxury car, calling allowance and a house provided at public expense because the office is “constitutional” is preposterous.

Most of the tricks required to trim compensation in Kenya will have to involve more transparency on spending and reducing amenities provided routinely to public sector employees, which are luxuries to most taxpayers.

These do not require technical decisions as much as they do political spine to cover the SRC as it makes necessary cuts that will no doubt be resented by politicians and bureaucrats. And while at it, the SRC shouldn’t accept invitations to meet State officers after work hours and with no formal record of what is discussed.

This problem is political and requires tough choices from an Executive ready to pay the political cost of shortening the allowance gravy train.  

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame