Report shows shrinking incomes, job cuts straining Kenyan families
A report tabled in Parliament has raised concerns over a steady decline in household incomes and a slowdown in employment growth, warning that Kenyan families are at risk of increased financial instability.
The report by the National Assembly’s Liaison Committee highlights how shrinking pay, rising deductions and unclear government policies are leaving many struggling to make ends meet.
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According to the Committee, declining purchasing power, high inflation, and burdensome government policies are worsening the economic situation for households. It pointed out that skewed policies in education and healthcare, alongside a rising cost of living, are aggravating financial distress.
“Families are struggling to cope with shrinking incomes,” the report states, citing data from the Kenya National Bureau of Statistics (KNBS).
It highlights that the average real wages in the private sector fell from Sh749,112 in 2020 to Sh686,451 in 2023, while those in the public sector dropped from Sh743,063 to Sh625,870 within the same period.
Slowed employment
Employment figures have also taken a hit. While total employment rose from 18.1 million in 2019 to 20 million in 2023, the growth rate of employment slowed from 4.9 per cent in 2019 to 4.4 per cent in 2023.
“The slowdown was more pronounced in the formal sector than in the informal sector. This is attributable to a slowdown in economic activity, technological changes and the impact of government policies,” the Committee said in its report on the 2025 Budget Policy Statement (BPS).
The government’s method of determining what households pay for university education and healthcare has also been flagged as problematic.
The report states that the means testing instruments (MTI) used to classify students for higher education loans and to determine household contributions to the Social Health Insurance Fund (SHIF) have been unfair to some households.
“The committee noted that the MTI intended to ascertain household contributions to SHIF and classify students into funding bands for higher education, have faced challenges,” reads the report.
It further highlights that inaccurate or incomplete information under the MTI system has led to improper categorisation of households and students, adversely affecting the delivery of social services.
SHA
The implementation of the Social Health Insurance Act, which replaced the National Health Insurance Fund (NHIF), has also raised concerns.
The Act mandates all Kenyans and non-Kenyans ordinarily residing in the country to register with SHIF. Employees in formal employment contribute 2.75 per cent of their salaries, while informal sector workers pay at least Sh500 per month, based on means testing.
According to the report, the financing framework for health sector reforms—including SHIF, the Primary Healthcare Fund and the Chronic, Critical and Emergency Illness Fund—remains unclear.
“Failure to determine this at the planning stage implies the need for additional resources midway, which may further impact the fiscal deficit,” the report warns.
The committee also notes that delays in settling claims by the Social Health Authority (SHA) have disrupted healthcare operations, particularly at primary healthcare facilities.
Additionally, the Affordable Housing Act, which imposes a 1.5 per cent housing levy on formal employment salaries, has raised further concerns. Employers are required to match this contribution, and failure to remit the funds attracts a penalty of two per cent of the unpaid amount per month.
While the Act suggests extending the levy to informal sector workers, the report questions how the government intends to collect contributions from those outside formal employment.
MPs have now called for urgent policy interventions to address the financial challenges facing families, warning that without decisive action, economic hardship will continue to deepen.
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