Informal workers earning less than the legal minimum wage
Millions of Kenyans in the country’s informal sector are earning less than KES17,200 per month, an amount that is less than the country’s legal minimum wage. This monthly compensation is in breach of the country’s minimum wage standard set in 2016.
“Income earnings in the enterprises influence the wages being paid to their employees. Consequently, the monthly wage paid by informal enterprises is below the recommended minimum wage,” a new report by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) stated in part.
“Thus, most skilled, and unskilled informal workers earn below the 2016 statutory minimum wage rate for a labourer of KES17,200, KES15,979.5 and KES13,592.7 for cities, former municipalities, and other cities, respectively,” KIPPRA added.
This is even as the overall productivity levels in Kenya’s informal sector continued to remain low, with workers receiving limited returns for their input.
Labour productivity is quantified moneywise and represents the average value of goods or services produced by one worker in that sector during a specific period in Kenya.
Whereas higher labour productivity indicates that workers are more efficient in producing output, often resulting from better skills, technology, or organizational methods, low labour productivity suggests inefficiencies, meaning workers produce less output than their input.
Kippra, however, noted that the minimum pay is gradually growing. In 2022, wages increased slightly, resulting in several workers in cities earning KES23,868 while those in former municipalities earned KES22,174 and workers in other towns earned KES18,862.
Titled Kenya Economic Report 2024, the survey from KIPPRA says that the average labour productivity is highest in the services sector at KES11,953.5, followed by agriculture at KES10,503.7, and industry at KES8,917.4.
Notably, the informal sector, which encompasses a huge chunk of Kenya’s micro, small, and medium enterprises (MSEs), shows significant variation in labour productivity because medium-sized enterprises reported higher productivity of KES11,818.1 compared to small enterprises that recorded KES11,490.8 and micro enterprises with KES6,095.4.
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The location of the businesses also emerged as a key influence on the level of productivity. For example, workers in market stalls were found to be more productive with an average productivity valued at KES15,880 when compared to open markets whose productivity stood at KES13,054 and Jua Kali sheds that only made KES4,929.
Kippra findings established that businesses engaging in product innovation showed marginally higher productivity value of KES11,771 and businesses that focused on process innovation paid KES 11,768 on average to their workers.
According to a 2021 World Bank report, labour productivity is influenced by several factors, including expenditure on research for development, type of skills available in the labour market, availability of on-job training, technology use, access to electricity and capital investment.
However, the importance attached to these drivers has evolved, with investment in research for development driving innovation and technology use, investment in human capital through on-the-job training and skills development becoming the most sought after.
“Higher labour productivity in medium firms is because of their higher expenditures on research for development and innovation, where they spend 2.1 per cent of their total firm’s expenditure on R4D, which allows the firms to engage in efficient production processes, resulting in high labour productivity,” reads the KIPPRA report.
