How workers are coping with widening wage, costs gap

Kenyans on minimum wage are barely able to make ends meet, according to available data.

The current minimum wage in major urban centres such as Nairobi, Mombasa, and Kisumu is Sh15,120 per month.

While this figure has been adjusted over the years from a mere Sh1,700 in 1994, it still struggles to match the estimated living wage.

Basically, living wage is the income required for a family to cover basic needs such as housing, food, healthcare, and education.

Defining an accurate national living wage is difficult due to regional differences in the cost of living. However, studies by the Global Living Wage Coalition in 2023 estimated the living wage in non-metropolitan urban Kenya (like Lake Naivasha) to be around Sh35,518 per month, and in rural areas such as Kericho around Sh30,531 per month.

The current minimum wage struggles to keep up with the ever-rising cost of living, particularly in urban centers.

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For instance, the rent for a one-bedroom apartment in Nairobi can range between Sh15,000 and Sh25,000 per month, potentially exceeding the entire minimum wage.

This leaves minimum wage earners in a risky financial situation, often requiring multiple income sources within a household to make ends meet.

The one thing that Kenyan workers anticipate on Labour Day is a probable increase in the minimum wage—the little bone thrown at workers.

But the difference between the statutory minimum wage and the actual cost of living is where the economy is bullying Kenyan workers.

While the government periodically reviews minimum wage levels, these adjustments often fall short of what is required to afford a decent standard of living.

So, how do Kenyans navigate this gap between the minimum wage and living wage, and how big is the gap?

Labour landscape and Wage gap

Kenya's labour market is significantly informal, with varying skills demand across industries. Key employing sectors include wholesale and retail trade, manufacturing, agriculture, education, and construction.

For skilled workers, though, emerging sectors like information technology and logistics are showing growing labour needs.

According to a Skills Needs Survey Report by the Federation of Kenya Employers in 2023, there is a demand for skills in IT, finance and business management, engineering, and logistics.

Notably, a considerable percentage of enterprises reported difficulty in filling vacancies due to a lack of properly skilled candidates or high salary expectations. This mismatch between available skills and employer needs contributes to wage disparities.

How Kenyan workers cope

With the big difference between the minimum wage and the living wage, Kenyan workers use several strategies to cope:

1. Multiple Income streams: Most Kenyans, particularly those in urban areas, engage in side hustles or look for additional part-time work to supplement their primary income. This could involve informal trading, offering services, or taking on gig economy jobs.
2. Informal Support Networks: Strong family and community ties often provide crucial financial and social support. Sharing of resources, childcare, and accommodation within extended families can help ease the burden of living costs.
3. Cost-Cutting Measures: Households often adopt strict budgeting and cost-cutting measures, prioritizing essential spending and foregoing non-essential items. This can include buying cheaper food options, using public transport, and limiting discretionary expenses.
4. Savings and Investment Groups: Participation in informal savings and lending groups (chamas) is a common way to pool resources for larger expenses, such as housing deposits or school fees.
5. Migration for Work: Especially those with sought-after skills, Kenyans seek employment opportunities in other countries where wages may be higher. Though controversial, the government has been actively pursuing bilateral labour agreements to facilitate this.
6. Upskilling and Education: Acknowledging the importance of skills in commanding better wages, workers invest in further education and vocational training to enhance their employability and move into higher-paying sectors.
7. Entrepreneurship: Some choose to start their own small businesses as a means to potentially earn a higher income than through formal employment, although this path comes with its own set of challenges.

Addressing the gap between the minimum wage and the living wage requires a multifaceted approach. This includes regular and realistic minimum wage reviews that consider the actual cost of living, investing in skills development to meet labour market demands, and creating an environment for better-paying jobs.

For Kenyan workers to live decent lives and contribute effectively to the economy, bridging this economic divide is important.