Productivity-based wages are good for Kenya’s economy

Opinion and Analysis

 

President Uhuru Kenyatta. PHOTO | FILE 

By ZIPPORAH MAINA

As the world marks Labour Day on Friday, industry continues to urge the Kenyan government to move to a wage system based on productivity.

Last year a good precedent was set when the President made no ceremonial wage increments announcement on Labour Day.

In an environment where industry-led economic growth is the lynchpin for achieving Vision 2030, it is imperative that wages are based on productivity.

Kenya is an economy with a thriving small scale industry whose growth is imperative to the country’s future prospects.

Ceremonial wage increments are what might just shatter any dreams of small manufacturers scaling up. Job creation is a key factor for economic growth in Kenya.

Industries are creating millions of jobs through direct and downstream activities. A shock in the system in the form of ceremonial wage increments would just result in layoffs of many employees which defeats the whole agenda of creating more jobs.

It is true that the cost of living has gone up in some sectors, but the reality is that industries factor in inflationary adjustments in the wages and an additional increment which comes without notice just sends balance sheets into the red.

Somehow industry would then have to find a way of recouping the costs and at times this comes through increases in product costs which is terrible for a country that is trying to maintain its global competitiveness.

Some prices have gone up and even at the old rates we are seeing the results of the high cost of doing business affecting the trade of local products in the East African Community.

One of the reasons is that there are goods from Asia which are landing in the region way cheaper than locally manufactured goods.

One asks how did we get to the point where goods are shipped in from Asia, land at Port of Mombasa pay all duties and taxes, are transported to Uganda or Tanzania and still land there cheaper than locally manufactured goods?

As other factors are worked on it is important not to worsen the situation by increasing the costs of our products because of ceremonial wage increments.

Kenya Association of Manufacturers has, to the chagrin of the labour unions, continued to support productivity-based wages.

This argument is not without a basis; the cost of doing business in Kenya is high-electricity costs are high despite ongoing efforts to bring it down with the planned generation of 5000MW by 2017. Taxes are high and transport network needs to be fixed.

Therefore as the country works on creating an enabling environment for businesses, we should not shoot our own feet with calls for ceremonial wage increments.