Minimum wage increase unlawful, says KEPSA

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KEPSA has noted the current raging debate on the very high cost of living that Kenyans are experiencing in form of very high food, fuel and energy prices.

Various stakeholders have voiced their concerns including the consumers, the oil marketers, the transport industry players and the government.

KEPSA realises that the cost of living increases as a result of many factors, both local and international. The mitigating measures therefore should take into account the factors causing the increase in the first place, giving priority to those that have the highest negative ripple effect.

The increase in the cost of living has led to the obvious demand for wage increments especially in the lower economic brackets.

While KEPSA appreciates and acknowledges the tough times that Kenyans are going through at the moment, it has the obligation to point out the salient issues that all stakeholders should concentrate on instead of the current exchange of rhetoric.

There is a clear process that has to be followed in accordance with the Laws of Kenya. In this process there is room for putting the case across clearly and having rational debate about the overall effect on the economy and whether as a country we wish to follow that route. The tripartite process is recognized and adopted the world over and it works. This process has not been followed and the private sector objects to this show of impunity in terms of the rule of law.

KEPSA discourages the increase of minimum wages based on a percentage basis.  Each area should be considered and a number given for increase of wages. KEPSA\’s position is that the law states that minimum wages should only be increased once every two years.

Should there be an overarching need to increase then this should be done through the Wages Council who may then recommend an increase, if they so consider fit. It is not for employers, workers or the government to make a unilateral public suggestion as this will create expectations that may not be met whether upward or downward.

The issue of minimum wage increases should not be politicized.

Wage increment should be the last resort because of the negative effect it can have to the same people it is meant to assist if not done from a holistic approach and as a country policy in terms of rates of increase, are rates region based, timeliness, how regular and so on. There is need to have rational discussion to get credible solutions. There is currently no national wage structure that goes from the lowest to the highest level and it would be an exercise in futility to put this as a solution to the current discussion on wages.

Some of the negative effects of ad hoc and unplanned wage increases include: massive job losses, increased casual employment, passing the increased labour cost to consumers. Focusing on other factors leading to high cost of living have more sustainable effects and less negative externalities.

As a country, our long term planning should always look at the projects that if not implemented,  and there are changes in the international markets or weather patterns, then the multiplier effect on related goods and services is high. For example, Kenya being a net importer of fuel, we need to have focused on projects that mitigate to some extent the costs resulting from local inefficiencies which are fully within the control of Kenya.

These include addressing the issues of efficiency at KPA, KPRL, storage reserves etc. These are costly but would cushion Kenyans to some extent form the increased global fuel prices. The same applies to agriculture, moving from rain fed to irrigation, increasing storage and diversifying produce. Moves to remove duty on wheat and maize helps. The same needs to be extended to rice and sugar, the other basic foods critical for the poor.

On the government claims about cartels and other business issues concerning pricing of commodities, this is supposed to be addressed by the Monopolies and Pricing Commission.

Salary raises cannot help unless the costs go down significantly. The way forward is to go for economic stimuli that will not Increase the cost of doing business but cushion a greater percentage of the population from the hard economic time.

A good start would be for the government to bring down the cost of electricity and fuel through tax reduction, and at the same time shield the shilling from weakening further.  As a country we do not want to lose our competitiveness in both local and international markets. Labour is a cost in production and we are already a high wage country.

Interestingly in recent times, the government has focussed on the ICC Process in the political sense at the expense of the prioritizing on poverty alleviation.

There has been slow progress and apparent lack of commitment to ensuring the implementation of the constitution meets the set deadlines. KEPSA demands weekly updates on the progress made in this direction if the government recognizes this as an urgent matter for the country rather than monthly or quarterly updates.

The bottom line for KEPSA is that all these factors impact on the credit rating of the country .

KEPSA is the national apex body of the private sector in Kenya. KEPSA\’s membership comprises Business Membership Organizations (BMOs) and corporate organizations.  The combined number of direct and indirect organizations that KEPSA represents, when membership of all BMOs is accumulated, totals in excess of 80,000 corporates.

This is in all sectors of the economy including manufacturing, banking, infrastructure, tourism, energy, ICT, agriculture, fishing, small enterprises, labour, transport among others. KEPSA provides a unified voice for the private sector to engage and influence policy formulation and implementation through the public-private partnership model.
 
Engineer Obath is the KEPSA chairman.

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