Why Kenyan workers are poorer compared to seven years ago

Recent demands by workers for over 100 per cent wage increase have been justified by a study that shows that the cost of goods has literally wiped their purchasing power over the last seven years.

According to the Institute of Economic Affairs, nominal wages among the middle class has risen by 42,000 a month yet when adjusted for inflation, the real money that ends up in employees’ pockets has reduced by a substantial Sh3,000.

“In terms of wages, the nominal wages for the upper limit grew from Sh67,380 in 2009 to Sh109,429 in 2015. However, due to inflation, the real wage dropped from Sh66,026 in 2009 to Sh63,834 in 2015,” IEA said in its latest report to be released today.

Those who earned Sh49,000 in 2009 saw inflation reduce their earnings value to Sh48,000, however, after constant wage increase to an average of Sh76,000, their real income dropped to Sh47,000 last year.

Workers agitating for higher pay insist that the small bumps in salaries negotiated through collective bargaining agreements and bonuses cannot match rise in the cost of goods and overall cost of living.

Just like teachers, doctors are demanding a 300 per cent rise in their salaries so as to be able to buy the same things they spent on over the years. However, the current stagnant salaries can hardly meet their usual expenses.

The economics think-tank which was studying the trends of the middle class in Kenya says that more people fit in the middle class based on what they earn yet the number reduces when assessed based on what they can afford to buy.

The number of employees falling within the middle class is seen to be on the general increase--rising from 166,515 people in 2009 to 272,569 in 2015. However, if inflation is factored, the number shrunk to 137,130 in 2009 and 260,180 in 2015.

Lower income groups

“From 2009 to 2015, the number of individuals in the middle class as a share of total increased raised from 8.5 per cent to 11 per cent in 2015 based on the nominal income ranges. However, after factoring inflation, the share reduced to seven per cent and 10.5 per cent in 2009 and 2015 respectively,” IEA said in the report.

The report also showed that very few people who are employed in formal jobs qualify as middle class since the majority (74 per cent) earn less than Sh50,000 a month.

Only 24 per cent of those informal employment earn between Sh50,000 to Sh100,000 a month, while on the other hand, the share of individuals earning above Sh100,000 on monthly basis stand at a mere 2.9 per cent of those employed.

“The rapid decrease in individuals ranked above the middle class and the simultaneous increase in individuals in the middle class and those below the middle class imply that more individuals are getting concentrated in the lower income groups,” IEA said.

In general, the Kenyan economy has seen a 42 per cent increase in jobs, up from 10.9 million jobs recorded in 2009 to 15.2 million in 2015.

This, however, masks the fact that nearly all these jobs are in the informal sector, which made up 8.68 million of the jobs seven years ago and has grown to 12.56 million by last year.