National Wage Policy: The Next step for Kenya

By Phyllis Wakiaga

In 2016, the Kenya Tea Growers Association decried the uncertain future of investment in tea, due to the rising costs of labour. Just last week, multinational James Finlay announced a phased plan to shut down its flower production business in Kericho, again, citing increasing labour costs as the leading factor for this decision. Without delving into further examples, just these two instances are enough to cause alarm, because we are talking of our top two foreign exchange earners as a country taking a hit in a span of less than two years due to high labour costs.

The Government’s Big Four Agenda aims to create jobs and combat the high rate of unemployment, which currently stands at 39.1% making us the country with the highest unemployment levels in the EAC. The agenda selects four pillars through which to drive its mission, one of which is Manufacturing. Under this sector, the focus is to invest in labour intensive areas such as textile and apparel and leather production to drive manufacturing contribution to GDP to 15% by the year 2022 from the current 9%. In present circumstances, however, this goal seems far out of reach and nearly impossible to achieve, because for the contribution of the sector to GDP to increase, it must employ rigorous strategies to ensure at least a 36% annual growth. In the just released Economic Survey by the Kenya National Bureau of Statistics, Manufacturing grew at a dismal 0.2% in 2017 compared to 2.7% in the previous year. Yet the sector is one of the leading employers in the country.

Given this background therefore, national policies on workers’ wages should be developed more sustainably. By this I mean, we ought to think of how to retain and attract investment that can provide more and more productive employment, but more importantly, we should aim to reduce the cost of living burden for our citizens – enabling each and every person to access quality basic amenities and save enough money to raise their general quality of life. Hence, wage policies should balance out economic and social benefits towards building a more tenable future for the country. Fair wages do not always mean higher wages for the worker; because as long as the cost of living keeps soaring, the ‘higher wages’ will only go towards meeting these added costs for basic provisions, while the citizens’ purchasing power will remain diluted and their disposable income will continue to shrink.

It is possible to achieve a healthy balance that does not pit the workers’ cost to live against industry’s cost to survive. There should be a concerted effort by the government to reduce the cost of goods in the proverbial food basket. A reduction of VAT on items such as milk, sugar, tea leaves, beans, cooking oil and paraffin would make a significant impact for workers’ incomes. Even if these goods were to come down by for instance 10%, workers would save approximately Kshs, 1400 per month for an average household bill which totals Ksh14, 000 for the family.

Other efforts would function through the NHIF such as provision of quality health care access and social housing schemes for workers, which would guarantee decent lives for them and their families. These strategies will ensure that the wages received can result into savings, and more disposable income, which in turn increases workers’ spending and expands the consumer market. This fuels the local economy to grow, as the productivity levels inevitably go up.

It is indeed possible to have fair wages and a thriving economy at the same time. Countries such as Bangladesh have been able to achieve this and neighbouring Ethiopia is employing these strategies to attract investment and increase employment opportunities for its people. Kenya is well-poised to achieve this given our regional position; we just have to be deliberate about it.

The writer is the Chief Executive of Kenya Association of Manufacturers and the UN Global Compact Representative for Kenya. She can be reached at ceo@kam.co.ke