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Inflation causes workers’ worst pay cut in 10 years

Artisan jua kali at the Kibuye market in Kisumu. [Collins Oduor, Standard]

The sustained rise in the prices of goods and services led to the second consecutive decline in the purchasing power of workers, with last year being the worst in a decade.

Government data released yesterday showed that real wages – a measure of income after taking into account the cost of the goods and services people buy – fell 3.83% to add to the decline of 1, 4% from the previous year due to worker wage cuts.

This means that since 2013, Kenyan workers have seen their real wages fall four times, with last year’s exceeding the 2.89% seen in 2017.

If prices rise faster than wages, workers are said to benefit from inflation-adjusted wage cuts, as their earnings now allow them to acquire fewer goods and services than before.

The 3.8% drop in real wages, which occurred in the year when inflation averaged 6.3%, was the worst in a single year since 2011, when real wages fell 8, 6% at a time when inflation was 8.6%.

Many companies, impacted by the Covid-19 disruptions, imposed pay cuts on workers in 2020 and struggled to restore full pay and raise wages above pre-pandemic levels.

The impact is that inflation has outpaced the pace of wage increases, worsening the well-being of workers in different sectors, both public and private.

The data shows that workers in the private sector suffered an average cut of 2,394.03 shillings in their real wages each month, while those in the public sector saw their wages cut by 2,298.94 shillings.

Ken Gichinga, chief economist at Mentoria Economics, recently said that inflationary pressure, which has weakened purchasing power, is part of why many people are turning to side gigs to supplement their employment income. “Many people develop the culture of secondary unrest because they feel they need a secondary source of income. Wages alone are not enough to meet the needs of workers,” Gichinga said.

Workers in the private electricity, gas, steam and air conditioning sectors lost 7,602.75 shillings of monthly income to inflation, while those in financial and insurance activities had to spend 7,286 shillings.

Inflation-adjusted earnings in professional, scientific and technical activities in the private sector as well as in administrative and support service activities averaged 4,426 shillings and 4,385 shillings per month.

But workers in the activities of offshore organizations and bodies, which include non-governmental organisations, were the hardest hit with a fall in their monthly real wages of 4.5% or 12,804 shillings.

The other big losers from inflation in the public sector were workers in financial and insurance activities, as their monthly real wages fell by 17.2% or 29,549 shillings.

Public sector workers in accommodation and catering activities saw their real wages fall by 4.72% or 8,889 monthly shillings, while those of workers in manufacturing and the supply of electricity, gas, steam and air conditioning fell 5,308 shillings and 6,154 shillings respectively. .

Official data shows that workers’ real wages have never grown more than 3.2% annually in the eight years to 2021.

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