Muna Wahome
16 June 2008
opinion
Nairobi — President Kibaki disappointed workers during Labour Day celebrations on May 1 when he ignored demands for a rise in the minimum wage.
What many are not aware of is that rising wages are becoming an important component of inflation. In turn, the competitiveness of the Kenyan labour market is being eroded in contrast to its Asian counterpart.
Nowhere is this more apparent than in the export processing zones where firms are finding it difficult to compete with Asia's low-wage operations.
Abandoned
The latest Economic Survey shows nominal wages went up 10.8 per cent last year. In the previous year, the figure was 12.4 per cent.
Unilever Tea chief executive Richard Fairburn said in 2005 labour costs grew by 150 per cent on a cumulative basis in a decade, making daily dollar wages in Kenya higher than in Tanzania, Uganda, India, Sri Lanka and Bangladesh. Attempts to introduce tea-harvesting machines were abandoned after vociferous complaints by trade unions.
Research indicates wage increases from collective bargaining agreements were double the statutory minimum wage between 1994 and 2001.
This might create the impression that Kenyan workers are doing well. But weighed against the real wage increases - after adjusting for inflation - there have been reversals.
Better off
In 2007, real average earnings went down 0.3 per cent. This means that the workers were better off the previous year, despite a record economic growth of 7 per cent.
In 2006, workers fared better with an improvement of 1.3 per cent.
Inflation was largely responsible for this.
Efforts to solve the problem by setting minimum wages have failed to work.
"This has led to significant displacement of workers to the informal sector. The outcome is largely attributed to the disproportionate increase in the cost of production that has been triggered by the wage policy over the years," says the Institute of Policy Analysis and Research.
It is understood that much of the increases have affected the top tiers with managers earning as much as their counterparts in developed economies.
But at the end of the day, the demand inflates prices for all Kenyans.
Be the first to Write a Comment!
Copyright © 2008 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
