Why The 18% Salary Increment Makes No Sense To Lowly Paid Kenyans

By Soko Directory Team / May 3, 2017




By Amina Faki

A new dawn settles in Kenya as the new month ushers in tough economic times with the rate of inflation escalating to a new high of 11.48 percent driven by high food prices.

Recently, the Head of State President Uhuru Kenyatta during the Labour Day celebration announced an increase of up to 18 percent in the minimum wage a call from the workers he had ignored for some time.

Initially, the minimum wage was at 10,955 shillings which have been raised to 12,926 shillings. According to the president, workers in the lower income bracket are struggling to afford basic necessities and it’s not fair that they should be taxed heavily. He added that all the people earning that and below should no longer be taxed.

This to many is seen as a relief. Literally, will it ease the struggles of the lower income-earners? The minimum wage increase is just a sugar coat of much more problems to add to the ones that the low income-earners already have or even worse; poverty, unemployment, loss of jobs, deductions, higher cost of living etc.

for instance, after the increment, a person earning 13,000 at the moment will soon be earning 14,700 shillings. But let us put this into perspective. With 13,000 shillings and subtracting the statutory deductions of 1,300 shillings, one goes home with a net pay of 11,700 shillings. After the increase, out of the gross 14,700 shillings, subtracting a tax of 1,900 shillings and statutory deductions of 1,300 shillings, one goes home with 11,500 shillings as net pay. Who is fooling who here? Before the increase, one gets a net pay of 11,700 shillings upon the increase, the net pay comes down to 11,500 shillings.

Jacqueline Mugo the Executive director FKE said in an interview that the wage increment would affect the cost of doing business and could end up hurting the ability to do business. She added that the increment will have an impact on jobs and already the corporate sector is hurting.

Last year, an increment in personal relief was first announced by the Treasury Cabinet Secretary Henry Rotich in the 2016/2017 budget which was designed to create comfort for those low wage incomes.

The increment in wage income and personal relief is a measure meant to cushion the wage workers from the high cost of living. The increment came amid the high cost of living with consumers already grappling with rising inflation that has pushed the cost of living to the 57th month high.

Data from the Kenya National Bureau of Statistics shows that high cost of living is pushed by rising food inflation including an increase in the price of sugar, maize flour, and milk.

The adamant question is that, will the 18 percent wage increase be able to cater for the common mwananchi’s needs and help them catch up with the ever escalating costs of the food basket?

The increment will have the biggest impact on those in the lowest income brackets, automatically putting the low wage income- earners who never paid tax before fall within the taxable income bracket of 15 percent. This is the reason behind the government increasing the tax bracket in the current budget in order for it to be able to collect an extra amount from the citizens. This, in turn, hurts the lowly paid wage worker who is bound to pocket even lower than what he/she is now.

Basically, this could be a strategy put in place by the government for the government to raise money in terms of returnable tax to be able to cover the budget deficit and pay off foreign debts.

Or is it just a plan to gunner votes to maintain positions in the government?

The common mwananchi should not at all be happy because of the salary increment instead should be worried about their place in the economy with the continuously rising inflation.



About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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