Job loss fears as employers dig in on minimum wage demand

Thousands of low-income Kenyans could find themselves jobless because of a stalemate between manufacturers and labour unions over a proposal to raise the minimum wage.

Manufacturers have cautioned the Government that they would have to lay off workers if the minimum wage is increased.

“A pronouncement to increase the minimum wage will be a huge blow to the industry and will negatively impact the livelihood of workers,” said the manufacturers’ lobby, the Kenya Association of Manufacturers (KAM), in a statement.

The lobby further said an increase in the minimum wage would be at odds with the Government’s agenda to boost manufacturing that should see an increase in labour demand to sectors such as textile and apparel, leather, iron, and steel.

“The industry has yet to pick up pace from last year’s setbacks which included a severe drought, high inflation rates, and the economic slowdown due to the election period,” said KAM.

“Additionally, businesses, in general, have been stagnating instead of thriving and at worst shutting down and relocating to other countries. The effects of a drastic minimum wage increase will mean restructuring and downsizing in many business operations,” explained the manufacturers.

The statement came in the wake of a push by the Central Organisation of Trade Unions (Cotu) for the Government to announce a double-digit increase in the minimum wage during today’s Labour Day fete.

Remained scarce

“We know that the economy has grown and inflation also went up and we are asking the Government this time for an 18 per cent increase in the minimum wage to allow workers to adjust to the living conditions,” said Cotu Secretary-General Francis Atwoli last week at a prayer meeting in Nairobi ahead of Labour Day.

President Uhuru Kenyatta last year promised to increase the minimum wage by 18 per cent. The average monthly minimum wage for workers in Nairobi, Mombasa, and Kisumu rose from Sh17,200 in 2016 to Sh19,831 last year, representing a 15 per cent increase. Data from the 2018 Economic Survey indicates that new jobs in the formal sector remained scarce and even declined in some sectors compared to previous years.

Growth in new jobs in the formal sector further seems to be decelerating, with the number falling from 134,200 new jobs in 2013, down to 106,000 the following year and 84,000 in 2016.

The scarcity of formal jobs has been attributed to stagnant growth in the key economic sectors, including agriculture and manufacturing, which account for the bulk of employment opportunities.

“Wage employment in the agricultural, forestry, and fishing declined by 1.6 per cent,” said Kenya National Bureau of Statistics in its report.

“Similarly, wage employment in the financial and insurance activities, mining, and quarrying declined by 2.3 and 1.4 per cent respectively.”

This saw more than 1,500 workers laid off from financial companies last year, with firms citing a combination of factors, including falling margins and automation.