BY JANE WACHIRA
According to financial times lexicon, a wage bill refers to the total amount of money that a company pays its employees. In this case the public wage bill refers to the total amount of money that the government pays to its civil servants. It is comprised of regular payroll expenditures such as basic salary, house allowance and all other allowances payable to public servants. It also includes other personnel related expenditure, which are not paid on a regular basis, such as fees, commissions and honoraria, refund of medical expenses and other personal benefits.
The public wage bill came under scrutiny after President Uhuru Kenyatta mentioned it in his September 21st speech regarding the teachers’ strike.
The body in Kenya tasked with reviewing the remuneration and benefits of state officers is the Salaries and Remuneration Committee (SRC), established under Article 230 of the Constitution. It is the duty of SRC to advise the National and County Governments on the remuneration and benefits of all state officers.
Currently the public sector wage bill accounts for 52% of the revenue collected. It is the most costly item on the budget. This could be attributed to the large number of workers the public sector has. There are about 700 000 public sector workers accounting for 1.5% of the total working population. The global average wage bill for middle-income countries is 35% leaving Kenya almost as twice above this figure. It (the wage bill) also accounts for more than 10% of the country’s Gross Domestic Product (GDP), whereas in other middle-income countries, it accounts for at least 5%.
GDP is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value (in this case shilling) of all goods and services produced over a specific time period. Comparing the GDP against the wage bill is essential since economic growth cannot be realized with huge debts, but with growth in real terms and not nominally.
Out of Sh1.1 trillion collected as revenue last year, Sh568 billion went to the public sector wage bill, accounting for 52% of the revenue. The left over, 48%, went to essential public services, debt and maintenance. Kenya’s public sector wage bill is flawed. It has been rising since 2008 when the grand coalition government was put in place. With the promulgation of the new Constitution 2010, which established numerous constitutional commissions and structures, it has continued to rise. Public sector workers have also been demanding pay rises, from parliamentarians to doctors, teachers and nurses.
Besides the legitimate workers, there is another category of ghost workers, who are up to 300,000 in number. The government could be spending Sh118 billion each year on ghost workers. At the same time Sh70 million is lost each month to individuals who left work, are retired or are deceased.
Mid last, the President announced that he, together with his deputy would take 20% pay cut, while other government officials such as cabinet secretaries and head of parastatals would take a 10% pay cut, all in a bid to save the economy. The wage differential cannot be ignored either. The lowest paid public servant earns between Sh13000 to Sh17000 while the highest earns at least over Sh800 000. The gap is huge, allowing the highest paid to earn 60 times more than the lowest.
In the September 21st speech, the President noted that if teachers were to get the 50-60% pay raise, the public wage bill would increase from 52% to 61%. Teachers at the moment get Sh174 billion from the public wage bill.
Whereas Kenyan teachers are the third highest paid in Africa after morocco and South Africa, our parliamentarians are among the highest paid in the world. This is regardless of the fact that we are a third country.
In 2014, The Institute of Economic Affairs (EIA) conducted an in-depth analysis on the public sector wage; in its paper ‘Public Sector Wage Bill: Policy Options,’ they made recommendations on ways to remedy the public sector wage bill crisis. Among others, they recommended increased revenue collection, introduction of performance contracts, streamlining of job descriptions to avoid duplication of duties (with the devolved government in place, the provincial system of administration has been rendered obsolete yet its structures are still intact), thorough streamlining of payroll handling and control, a freeze on salary increments especially for parliamentarians, revision of wages and labour policies and elimination of ghost workers through regular updating of active public servants records.
The cabinet secretary for the treasury pointed out that the wage bill has been rising significantly despite poor labour productivity of the civil servant. While salaries have risen by 21% in the last 3 years, productivity has increased by only 30% over 11 years. As a result, its sustainability has become far above average of other east African nations, and Asian countries such as South Korea, Singapore and Malaysia, crowding the country’s resources for the much needed development projects.
At independence Kenya’s economy and that of South Korea was at par, today, over fifty years after independence we are still a developing country while South Korea has moved ahead.
The problem is not just in the wage bill, says economic analyst Allan Egesa. “Cutting the wage bill alone will not solve the afflictions the government is facing over its effort to narrow a budgetary deficit. Much more wastage in the government is due to corruption, ghost workers and the ever-growing thirst for more perks by legislators. Currently, government it is battling to recover the lost of Sh791million at the NYS and has Sh615 billion looming in debt.” He was talking at the Institute For War and Peace Reporting (IWPR).
The vice chairman of SRC, Daniel Ogutu says that, “Kenya is like a sick patient who does not look sick but on going to the doctor, the patient is told that ‘at this rate you’re soon going to collapse. It may be five to ten years, but you will collapse.”
