News

Finances: How Kenya can tame ballooning wage bill

Friday, August 16th, 2019 00:00 | By
New Kenya shillings. Photo/Courtesy

Riziki Dunstan

While we remain the stickler of the reasonable national minimum wage for all the country’s civil servants, our deep fears are that another industrial disharmony of an earth-shaking magnitude will envelop the scheme unless proactive measures are put in place to cushion the effects.

In well-organised climes, an increase in the minimum wage is a major directive of the government, which requires creative and constructive planning, including steady economic growth and effective inflationary control measures. Here in Kenya, the reverse is the norm and everything tilts towards the “stomach economy”. 

While the recurrent expenditures rise with double digits with attendant deficit financing,  that of capital decreases dangerously. Currently, Kenya spends between  70 and 75 per cent of the national budget on running the government.

Reducing wage levels will fall disproportionately on the lower-paid cadres because that is where the larger numbers are, although a reduction on the nominal wage level seems to be the preferred option for those advocating for the revision of the wage bill. However, wouldn’t it be refreshingly honest if they simply came out and said; “reduce the public wage levels”?

In addition, there are problems never mentioned by advocates of “revisiting Croke Park”.  The most glaring omission is the knock-on effects.

Reducing the wage bill lowers the spending power. Notably, the largest single contribution to our national income is consumption hence, massive shocks to wages in over 15 million consumers will reduce consumption further.

This weakens the economy. “Borrowing to keep the streets safe and the sick healed,” doesn’t have quite the same emotive punch and may suggest worrying Keynesian or even socialist tendencies.

The public sector wage bill is coincidentally bigger than the public debt which currently stands at over Sh3 trillion. In classic style, what is called the fallacy of conjugation is applied to suggest that “we are borrowing to pay the wages of public servants”. 

There is a need to reduce the wage bill, but will this be achieved by reducing the nominal wage? Highly unlikely. And will the dreary code-worded dance continue in the absence of a  rational debate? Certainly.

There is a growing global consensus about the corrosive effects of unfair tax practices spurred by the tough economic climate. Globally, citizens are now increasingly aware that there is no level playing field in paying tax.

Something is gravely amiss when multi-billion dollar companies pay a lower rate of tax than the citizens. Corporate tax evasion and avoidance drain public coffers, costing governments billions of shillings in revenue annually.

While these practices are globally endemic, East Africa, and Kenya to be specific, has borne the brunt of tax evasion. The country loses more in illicit financial outflows than international aid.

To reduce the wage bill, we must emulate best practices from countries such as Ghana and Liberia. The government should go back to basics and audit the payroll, through the Biometric Verification of its employees. Once the payroll has been cleaned, the government should then ensure it gets the best out of workers.

In India, for instance, the government issues a citizens’ report card, a method already introduced in some regions and sectors in Ghana, Uganda and South Africa. This helps to enhance efficiency in government.

Citizens, too, must demand value for money from the government and encourage it to tighten its revenue collection.

Accountability and increased productivity must not be toyed with. It is our divine calling to make things work as a country. This is what future generations will be proud of.

It is not only that there are too many ghost workers who draw salaries from the government, but there is also evidence of gross indiscipline among civil servants, creating more avenues for wastage. 

When reviewing public sector wages at the aggregate level, it is important to note that salary levels often vary significantly across the public sector— and particularly between the core civil service and other groups.

 Such drivers of the wage bill need careful investigation. - The writer is a lawyer and governance consultant

More on News


ADVERTISEMENT