Kenyans earning big salaries, but where does it all go? – World Bank
Kenya is among countries with the highest labour costs in Sub-Saharan Africa, a new report reveals.
According to latest World Bank survey on Global Value Chains (GVC), Kenya’s labour costs are twice the average Gross Domestic Product (GDP) putting the country at a precarious position in the international market.
The bloated wage rate limits Kenya’s competitiveness in the world market putting it at a disadvantage in basic manufacturing activities.
Since manufacturers prefer a balance between wage levels and output, Kenya is unlikely to attract goods in the international market unless it streamlines its wage levels.
“Many countries with low levels of per capita income and large pools of moderately skilled, underemployed labor find themselves priced out of the market for GVC investments in basic manufacturing activities because of uncompetitive labour costs,” says the report signed by World Bank President, David R. Malpass.
The survey, which analysed data collected from 5,500 companies in 29 countries, indicated the cost of labour in manufacturing firms in the African region, is significantly higher for every given level of GDP with exception of Ethiopia where the wage levels are at par with output levels.
The report, which comes even as Kenyans are grappling with the scourge of unemployment and dissatisfaction with remunerations, attributed the noncompetitive labour costs to a number of factors including exorbitant forex rate and rigid labour policies.
“Over-valued exchange rates and restrictive labour regulations raise the cost of labour, preventing labour abundant countries from taking advantage of their endowments,” states the report.
Run away exchange rates are most prevalent in countries that rely in natural resources, therefore it becomes a problem when such countries join the basic value chains in manufacturing.