Two weeks ago, this column took issue with the proclamation that we have a severe wage bill crisis. I demonstrated that the claim was inconsistent with the Budget Policy Statement that is presently before Parliament. To date the Government has maintained a studious silence on this contradiction.
I have since seen a presentation given by the Cabinet Secretary for Planning and Devolution at the wage bill conference organised by the Salaries and Remuneration Commission (SRC).
It states that we are facing a “development crisis” because of a rapidly rising wage bill. The evidence of this is as follows. In the current financial year (2013/14) the wage bill will be 13 per cent of GDP, 51 per cent of revenue, 29 per cent of recurrent budget, and 35 per cent of total public spending.
These numbers, it concludes show that that the wage bill is “taking a disproportionate share of our resources”.
The wage bill cannot be 13 per cent of GDP and 51 per cent of revenue at the same time. Why? If the wage bill was half the revenue, it would mean that revenue is 26 per cent of GDP. But we know that our revenue is just under 24 per cent of GDP.
The presentation shows a stable wage bill at 11 per cent of GDP up to 2011/12 and then jumping to 13 per cent last fiscal year. Two per cent of GDP is not loose change—it is in the order of 70 billion shillings. Either there is a financial scandal of monumental proportions somewhere, or these numbers are cooked.
That is not all. To assert that a wage bill of less than a third of recurrent expenditure and just about a third of total public expenditure as a crisis is preposterous. These ratios are excellent. They cannot possibly be improved on. What are these people smoking?
GAP BETWEEN BOTTOM AND TOP
Why is the Government cooking figures, and so incompetently at that? Why are otherwise intelligent and knowledgeable people making complete fools of themselves? I have a theory that might just make sense of this spectacle.
A decade ago, I was tasked, together with veteran technocrats Harris Mule and Prof Terry Ryan by former Finance Minister David Mwiraria to look into public wage policy. This followed a year of unrelenting industrial unrests that were threatening to cripple the Narc administration.
Kanu had given Narc a hospital pass, in the form of a hefty pay award to teachers. Public university staff, health and local authorities workers had all gone on strike and secured wage increases, as had the police and the military. The core civil service was rumbling.
I have reproduced here two pieces of analyses from the report that we prepared for the minister. The graphic compares the pay of the highest paid Kenyan official with their counterparts in the region.
We calculated that in purchasing power terms, the Kenyan pay was not only way above the other countries in the region; we paid him more than the second senior most international civil servant. And this is excluding allowances, which as we shall see, may have a lot to do with this wage bill scaremongering.
The table compared the wage dispersion over time and with the comparator countries. The salary structure set by the Ndegwa Commission in 1972 had the highest office earning the equivalent of Sh300,000 in 2003 prices, and the lowest the equivalent of Sh7,900, a multiple of 38 times. Over the next three decades, the basic salary at the top increased two-and-half times in real terms (that is inflation adjusted), while the guy at the bottom lost 25 per cent of the purchasing power.
The gap between the bottom and the top of increased from a multiple of 38 to an incredible 118 times.
But it is the fellows in the middle that had taken the biggest hit. In real terms, they were earning a quarter of what their counterparts were earning in the early 70s. This is where the technical cadres of the civil service—the teachers the doctors, the nurses and engineers—are. It explains the collapse of public services from the mid 80s onwards as these cadres were demoralised, many left the public service, and those who remained either spent most of their time moonlighting, soliciting bribes, running side businesses and pilfering government supplies to make ends meet.
HEFTY ENTERTAINMENT ALLOWANCES
This current wage bill brouhaha fits the pattern that is responsible for creating and sustaining these disparities. Public sector pay is reviewed by ad hoc independent commissions appointed by the President every so often. This is what the public thinks.
In reality, the commissions only make recommendations. The Government sets up an internal process to decide which recommendations to adopt and how to implement them.
During the 80s and 90s, when the government was under financial squeeze, the argument would also be that we could not afford to implement the pay for the huge numbers in the middle and lower ranks. But the top bureaucrats, the very people making the recommendations, would argue that since the numbers at the top were few, their awards were affordable.
So the review recommendations would be implemented on a sliding scale. The top echelons would get the full award as recommended and the rank and file would get token increases. Case in point. The last commission to review civil service pay was the Kipkulei Commission of 1998/99. The commission recommended pay for the top band of Sh140,000 to Sh531,000. It also recommended phasing out of many allowances and limiting allowances to 20 per cent of basic pay.
A task force established to advise on implementation scaled this down to Sh154,350 to Sh291,000. The task force recommendations appeared as a draft sessional paper but it was never tabled in Parliament.
When it came to implementation, the lower recommendations of the task force were ignored and the commission’s higher recommendation was adopted. What’s more, it was not the salaries that were adjusted but rather housing allowances, the complete opposite of the commission’s recommendations. The top bureaucrats also took the opportunity to award themselves hefty entertainment allowances. The structure ended up more distorted than before.
And it has become progressively worse. A paper written by Kenya Institute for Public Policy Research and Analysis for the SRC shows how the racket has evolved. While basic salaries have remained more or less stable in the decade since our report, the allowances have become even more perverse.
MAGNITUDE OF DISPARITIES
The figures suggest that the disparities of the total earnings between the top and the bottom have declined but a closer look at the allowances show that they conceal more than they reveal. The allowances for the lowest job group include leave travel allowance of Sh4,000 and hardship allowance, which is not paid to everyone. The largest allowance is transport of Sh12,960, but this appears in some job groups and not others.
Job groups B,C,E and H seemingly don’t get transport allowance. It is impossible to figure out what the actual take home pay of any job group is from this data. This is deliberate obfuscation. It inflates the pay of the lower cadres so as to understate the magnitude of disparities. It is very unlikely that there is anyone in Job Group A taking home Sh34,000 a month.
The figures at the top suggest that there are a few plutocrats who may be taking home allowances that exceed their already excessive basic salaries. The average allowances for the top four job groups S to V is Sh780,000. The single largest item is a category listed as “special salary”. It ranges from Sh180,000 to Sh470,000. Who earns these special salaries, and what is the justification? Where are they decided, and by who? At least MPs do their pay hikes in public.
Now, a real motive for manufacturing a wage bill crisis is on hand. It’s a red herring. Its purpose is to divert the attention of the SRC from the pay disparities, by sending it on a wild goose chase.
It is instructive that the figures purporting a crisis only appear in presentations to, and events organised by the SRC. And the SRC has quite evidently fallen for it, as indeed many other gullible Kenyans who seem so eager to trust the Government.
Fellow Kenyans, there is something you need to know. Governments lie.
David Ndii is Managing Director of Africa Economics