YVONNE’S TAKE: The irony of maximum taxes and minimum wages

On my take tonight, I reflect on what has become an annual ritual on the Labour Day every year in this country. I am talking about the typical speeches during the celebrations to mark Labour Day, but more specifically the announcement of an increase in the minimum wage. Tonight, I ask, to what extent are these pronouncements reflective from present realities, and is it a piecemeal approach vs a whole general understanding of the economic situation that prevails? This year, the proposal is to increase the minimum wage by 6 per cent. Now this is well and good. Let’s get some context first, shall we?

On the one hand the push is for the private sector to create more jobs and in fact to pay them better, with an enhanced minimum wage. Well folks, there is only one economy and it works in concert, in harmony. The piano player must be in harmony with the sax player and even the drummer.

So, on the one hand, there are calls for more jobs, better pay, yet on the other? The Finance Act, 2023 sings a different tune. The Federation of Kenya Employers (FKE) has raised concerns over the effects it has on the business environments. FKE has said; “The Finance Act, 2023 has led to unsustainable business costs, negatively impacting cash flows, payroll, general wage demand, and business closures” so, it is possible to come up with taxation measures that depress production and disincentivize employers but then still expect them to, with a very good smile ensure an increased basic minimum wage?

And don’t forget, there are more deductions on the way, SHIF deductions are set for July this year. This, as I have said here on my take before, is a typically cruel Kenyan irony. In the same vein, the President rules out a tax reprieve for Kenyans, with even more taxation measures set for the new financial year. So here is the harmonious concert works. Increased taxation means reduced disposal income. Reduced disposal income means reduced ability to pay casual labourers in homes and other establishments the prescribed basic minimum wage. This even as a certain category of workers are to be paid Ksh.30,000 a month. Whilst they probably deserve this and perhaps more, where is this money supposed to come from?

Folks, typically every employer faces the same problems government is facing. If government is having a hard time paying intern doctors, would private sector employers not also have the same struggle with their employees? Government should learn to wear the shoes of fellow employers. By doing so, perhaps their tax measures will be more considerate and those percentages in earnings will be more thoughtful in the process of deliberation. So my heart goes out to the big portion of Kenyans that are on the minimum wage category because in the many cycles of the yearly ritual, I have not once heard that those increases are actually effected, most Kenyans can’t afford that. We know that it is good faith arrangements that are keeping many households going.

We need to relate these conversations. The economy is one whole, not pockets of progress of depression and growth. Cost of living has an impact on everyone including employers, for whom the unions do not speak so eloquently. The economy is one column, top to bottom and vice versa. We have one body of the economy. Wellness cannot be extended to some pockets of it. Th government may do well to remember that.