Public servants hit hardest by rising cost of living - report
A report by the Parliamentary Budget Office (PBO) shows that their real wages have fallen by 15.8 per cent since 2020, leaving them with less money to cover daily expenses.
Public servants have been hit the hardest by rising prices, with their earnings losing value twice as fast as those of private sector workers.
A report by the Parliamentary Budget Office (PBO) shows that their real wages have fallen by 15.8 per cent since 2020, leaving them with less money to cover daily expenses.
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The PBO, which advises Members of Parliament on budget and economic matters, revealed that while workers in the private sector also experienced a decline in their earnings, their real wages shrank by a comparatively lower 8.4 per cent over the same period.
Real wages, which measure income after adjusting for inflation, determine an individual’s purchasing power. A decline in real wages reflects a lower ability to afford goods and services.
“There has been a consecutive negative annual change in real wages per employee in the formal sector since 2020, signifying a reduction in purchasing power for individuals. Between 2020 and 2023, the combined real wages for both the private and public sectors decreased by -10.7 per cent, with the highest declines witnessed in 2021 (-3.8 per cent) and 2023 (-4.1 per cent),” the report on budget options for the current fiscal year states.
According to the PBO, while all workers in Kenya have lost purchasing power since the onset of COVID-19 in 2020, public servants have suffered the most. This is attributed to continued employment in the public sector despite the government freezing salary reviews for two years from July 2021 due to revenue collection challenges.
“The real wages of public sector employees have decreased more than their private sector counterparts over the past couple of years. Annual average real wages in the private sector reduced from Sh749,112 in 2020 to Sh686,451 in 2023, a reduction of 8.4 per cent, while that of the public sector real wages reduced from Sh743,063 in 2020 to Sh625,870 in 2023, a reduction of 15.8 per cent,” reads the report.
Monthly, the figures show that the average real wage for a private sector worker dropped from Sh62,426 in 2020 to Sh57,204 in 2023, representing a monthly loss of Sh5,221 in disposable income.
In contrast, public sector workers saw their monthly real wages drop from Sh61,922 in 2020 to Sh52,156 in 2023, translating to a loss of Sh9,767 in disposable income per month.
Inflation, new taxes
The decline in purchasing power among public servants has been exacerbated by the introduction of new taxes and levies, coupled with inflation, which peaked at 9.6 per cent in October 2022.
The report also highlighted employment trends, indicating that 20 million Kenyans were employed in 2023. Of these, 16.7 million worked in the informal sector, while 3.3 million were in the formal sector.
Most informal workers were engaged in wholesale and retail (9.7 million), manufacturing (3.4 million), and community, social, and personal services (two million).
The report also notes that Kenya’s economy has become more efficient over the years, with a major productivity improvement. It reveals that total factor productivity (TFP), which measures how well labour and capital are used in production, increased from -5.6 per cent in 2014 to 1.6 per cent in 2023.
“This means that the country is now using its resources more effectively to produce goods and services,” reads the report.
One of the key areas of focus has been labour productivity, which reflects how much workers contribute to the economy. The report states that the government has made efforts to improve productivity by investing in education, infrastructure, and technology.
Better education and skills training have helped workers perform better, while improved roads, electricity, and communication networks have made it easier for businesses to operate.
It adds that government policies have also played a role in creating a favourable business environment, attracting both local and foreign investors. These investments have led to more businesses and industries, helping to improve productivity.
The report also highlights a slight increase in the number of people participating in the workforce. Kenya’s labour force participation rate rose from 73.2 per cent in 2014 to 73.7 per cent in recent years. This means that more people of working age are either employed or looking for jobs.
However, the report warns that not all these jobs are well-paying or stable. Many people are working in the informal sector, where incomes can be low and unpredictable.
While more people are looking for jobs, the report notes that some may not have the right skills for available positions.
“The mismatch between skills and job market needs remains a challenge. The increase in the labour force is a good sign for economic growth, but only if there are enough quality jobs available,” reads the report.
The report stresses the need for policies that not only encourage job creation but also ensure fair working conditions and long-term economic growth. To keep improving productivity, it notes that Kenya needs to focus on quality education, advanced technology, and a better business environment.
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