Salaries of more than three-quarters of Kenyan workers should be doubled to cushion them from the current high inflation, and ensure they maintain a decent standard of living, a State economic think-tank says.

Kenya Institute for Public Policy Research and Analysis (Kippra) notes that 77 per cent of the country’s labour force earns below the minimum wage. Out of this 29 and 71 per cent are in the formal and informal sectors respectively.

In terms of location, a higher proportion of the population earning below minimum wage, estimated at 72 per cent, are in rural areas. The rest, 18 per cent, are in urban areas,” Kippra states in the Kenya Economic Report (KER) 2023.

Kenya’s current rate of minimum wage, the base-level amount workers must earn, can only cover about half of the expenses required for a decent living standard.

With a lower purchasing power, it implies workers are being forced to cut expenses on basic things like food, shelter, transport, and health to enable them to live within their means. The minimum wage is often set based on location, occupation, and economic sector.

“Whereas minimum wage is legislated, its implementation in Kenya has faced limitations in compliance and enforcement, which has resulted in workers not receiving the intended benefits of minimum wage,” Kippra states in the report.

The latest quarterly labour force report indicates the country had a total of 19.4 million workers by the end of December 2022, meaning some 14.9 million workers could be earning below the minimum wage.

The country’s minimum wage was increased to Sh21,311 per month in 2018 and remained unchanged for four years until May 2022, when it was increased to Sh23,868 per month for those dwelling in cities.

Although last year’s wage increase was about 12 per cent, the overall cost of essential goods and services shot up by an average of 22 per cent, indicating the living wage falls far behind the statutory minimum wage.

The inflation rate – a measure of annual changes in the cost of living – declined to 6.7 per cent in August, but the impact of this reduction remains unfelt owing to the steep prices of energy, which is a key determinant in economic growth.

“This suggests that the impact of inflation is higher on minimum wage earners compared to higher income earners. This may lead to an increase in income inequality and poverty if the purchasing power of the low minimum wage earners is not maintained,” says Kippra.

The institution has recommended enforcement of the policy to be strengthened, provision of comprehensive social protection systems other than the minimum wage, and lowering of Value-Added-Tax (VAT) on certain foods such as edible oil. The concern over unmet minimum wage comes at a time when Kenya is still proposing to further raid the workers’ payslips through more hiked taxes, levies, and statutory deductions.

For instance, under the Unemployment Insurance Authority Bill, salaried workers will be deducted three per cent of their basic pay, an amount that employers will match to help offer up to six-month relief for workers who involuntarily lose jobs.

Social Health Insurance Bill, 2023, that has proposed workers to compulsorily contribute 2.75 per cent of their income to the yet-to-be-formed Social Health Insurance Fund, is also on the line.

The take-home income for Kenyan workers started reducing under the Kenya Kwanza administration in March 2023 following a tenfold increase in the contributions to the National Social Security Fund (NSSF). This was followed by the newly introduced 1.5 house levy in July under the current Finance Act 2023.