Public servants have been the biggest victims of eroded purchasing power due to inflation, which has hit them double compared to workers in the private sector.
A report by the Parliamentary Budget Office (PBO) -- the office that advises lawmakers on budget and economic affairs — shows that since 2020, the real wage for workers in the public service has been eroded by 15.8 per cent, as that of workers in the private sector declined by 8.4 per cent.
Real wage refers to a person’s income after accounting for inflation and is used as a measure of what one can buy with their wages. Any changes to real wages reflect effects on peoples’ lifestyles.
“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),” notes the PBO’s report on budget options for the government for the current fiscal year.
The PBO, which offers technical advice to parliament regarding economic issues, notes that while all Kenyan workers had lost purchasing power since when the Covid-19 pandemic struck in 2020, it has been public servants who have suffered the most.
This could have been due to the continued employment of workers even as the government froze salary reviews for two years since July 2021, in the face of revenue 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 percent,” the PBO notes.
This implies that on a monthly basis, the average real wage for a worker in the private sector dropped from Sh62,426 in 2020 to Sh57,204 in 2023, meaning that such a worker lost a monthly disposable income of Sh5,221.
On the other hand, the statistics imply that in the public sector, the average monthly real wage dropped from Sh61,922 in 2020 to Sh52,156 in 2023, amounting to a monthly drop of Sh9,767 worth of disposable income.
This means that on average, public servants lost more purchasing power over the three years, when the country witnessed the introduction of a wave of new taxes and levies, and inflation rocking a high of 9.6 per cent in October 2022.
A total of 20 million Kenyans were working in 2023, with the informal sector employing the majority (16.7 million) and the formal sector 3.3 million.
The majority of the informal workers are in wholesale & retail (9.7 million), manufacturing (3.4 million), and community social & personal services (2 million).
On the other hand, the private sector employed 2.1 million of the formal sector workers as the government employed 993,000 (30 percent) workers, and 172,000 (5 per cent) were self-employed.
“Total employment grew at an average annual growth rate of around 3 percent over the last five years. Specifically informal employment grew at an average annual rate of 3.2 per cent while formal employment grew at an average annual rate of 2 per cent,” the PBO notes.
The report, however, notes that while employment continues to be created in the country, take-home for the workers has been declining, as goods’ prices stay high and the government brings in new taxes.
Since 2019, 1.9 million new jobs have been created in the country, out of which 1.6 million have been in the informal sector.
