From left: Planning Principal Secretary Julius Muia, Treasury CS Henry
Rotich, Nelson Gaichuhie, chief administrative secretary at Treasury and
Kenya National Bureau of Statistics director general Zachary Mwangi on
April 25, 2018. PHOTO | DIANA NGILA | NMG
Summary
- Formal sector employees took a pay cut of 2.9 per cent last year when their wages are adjusted for inflation, leaving them in a worse financial position compared to previous years.
- This was the first time in five years that real wages dropped.
- The purchasing power erosion came in the middle of an economic slowdown that saw growth decelerate to a five-year low rate of 4.9 per cent from 5.9 per cent in 2016.
Kenyan workers’ take-home pay fell below the cost of living in
2017, weakening consumer purchasing power in an economy that grew at the
slowest pace since 2012, according to the 2018 Economic Survey report
released yesterday.
Formal sector employees took a pay
cut of 2.9 per cent last year when their wages are adjusted for
inflation, leaving them in a worse financial position compared to
previous years.
This was the first time in five years that real wages dropped.
“Real
average earnings declined by 2.9 per cent compared to an increase of
0.1 per cent in 2016, mainly due to the increase in inflation,” says the
Economic Survey 2018 report.
Inflation-adjusted pay is technically known as real wage and is
ordinarily taken as the best indicator of the workers’ ability to
purchase goods and services based on prevailing prices. The survey also
found that the economy defied a tough political climate and
environmental challenges to mint 110,000 new formal sector jobs in 2017.
The
purchasing power erosion came in the middle of an economic slowdown
that saw growth decelerate to a five-year low rate of 4.9 per cent from
5.9 per cent in 2016.
Kenya’s average real wage slipped
to Sh30,750 per month, or Sh369,004 yearly, down from Sh31,664,
according to the survey by the Kenya National Bureau of Statistics
(KNBS).
Inflation surged to an average of eight per cent in 2017,
compared to 6.3 per cent the previous year, driven by sustained increase
in prices of food and cost of transport, along with high housing and
healthcare costs.
The slowdown in workers’ real
earnings also suggests that many employers did not award their workers a
pay increase in a year that was roiled by a prolonged election cycle
and drought.
It did not help that the banks tightened credit flow to small businesses and individual borrowers.
Minimum wage
Official
data shows that wage increments were scarce and marginal despite
President Uhuru Kenyatta’s decision to raise the minimum wage by 18 per
cent in May last year ahead of the August elections.
That pushed the average minimum pay of the least paid workers in Kenyan cities to Sh19,831 from Sh17,200.
Economists
have, however, warned that use of average wage as a yard stick in
assessing the country’s earnings may not offer a true representation of
the labour market.
This is because of the yawning pay
gaps between a few highly paid managers and the majority of employees
who earn less than the average pay. The survey shows that the economy
shrugged off a hostile climate to generate 110,000 new formal jobs,
nearly growing by a third from 2016’s 84,800.
The growth bucked a recent downward trend in formal jobs
creation, though the picture of the job market is one of mixed fortunes
as companies, led by banks, have recently cut staff numbers.
Corporate Kenya
The
survey also found that the public sector last year overtook the private
sector as a creator of new formal jobs, offering a glimpse into the
state of corporate Kenya.
The private sector churned
out 49,200 new formal jobs in 2017, a decline from 57,600 the previous
year compared to the national and county governments which added 60,800
formal jobs.
KNBS, however, warned that “the new jobs
included the extra personnel that the IEBC hired to manage the elections
and recruitment in essential services such as health, education and
security.”
Overall, the economy created a total of
897,800 new formal and informal jobs last year after recording an eight
per cent jump. Up to 83 per cent or 787,800 were informal jobs.
Though
formal sector workers took a pay cut when their pay is adjusted for
inflation, nominal average annual earnings grew to Sh684,097 last year,
or a monthly paycheque of Sh57,008, from Sh53,752 a month in 2016.
Govt pay higher
Public
sector salaries remain higher than private sector pay, with government
employees earning an average of Sh57,915 per month compared to the
private sector’s Sh56,624.
Employees in the financial
services and insurance sectors remain the best paid in the country,
followed by those in energy, the survey showed.
State-employed
workers offering financial and insurance services last year pocketed an
average Sh141,988 per month, while their counterparts in the private
sector received a monthly take-home pay of Sh146,630.
Overall,
some 16.9 million people were in employment last year, out of which 14
million were in the informal sector and 2.7 million in formal
employment.
Total wage bill hit Sh1.8 trillion from Sh1.6 trillion.
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