Employers oppose wage increase

PHOTO | FILE The chairman of the Kenya Association of Manufacturers (KAM) Polycarp Igathe (right) shares a joke with Kenya Airways Group Human Resources Director Alban Mwendar (left) during a past function. Mr Igathe criticised President Uhuru Kenyatta’s move to increase the pay of the lowest paid workers saying it could lead to an increase in the cost of goods.  NATION MEDIA GROUP

By LUCAS BARASA lbarassa@ke.nationmedia.com
Posted  Thursday, May 2  2013 at  23:30

In Summary

• The 14 per cent pay rise awarded to lowest paid workers by Uhuru likely to push up goods prices, say manufacturers

Manufacturers have criticised President Uhuru Kenyatta for raising the pay of lowest paid workers, saying it could lead to an increase in the cost of goods.

Kenya Association of Manufacturers chairman Polycarp Igathe said the increment “left a bad taste in the mouth of industries”.

On Wednesday, President Kenyatta announced an immediate minimum wage increase of 14 per cent. He said this was to cushion Kenyans against the high cost of living

.

Last year, the minimum wage was increased by 13.1 per cent to Sh8,579. Now, the lowest paid worker in Nairobi will pocket Sh9,780 a month.

The Federation of Kenya Employers had proposed a 4.5 per cent annual wage increase in keeping with economic growth.

On Tuesday, the federation’s spokesman, Mr Felix Otiato, said the 14 per cent increase is unsustainable under the current economic conditions. The increment should be in line with the performance of the economy, he added.

The Central Organisation of Trade Unions proposed a 60 per cent rise. An independent organisation set up by the Ministry of Labour proposed an increment of between 14 per cent and 17 per cent.

Mr Igathe said such decisions “always bring the country back to a vicious cycle” and could lead to an increase in the cost of goods.

“Any wage increments that are not based on productivity will always have negative effects on the same people that we will be trying to protect because companies will just increase the cost of the final goods and this also affects the competitiveness of Kenyan goods on international markets,” said Mr Igathe.

He regretted that some companies had shut down in Kenya because of the high cost of doing business.

“Not so long ago, a motor assembly plant moved to South Africa while in Kisumu, a cereal processing company moved its plant to Zimbabwe.”

Mr Igathe said that the textile industry, which is also hard hit, is likely to see many companies scale down heavily as a result of high labour costs.