Shopping baskets shrink as wages stagnate

Lower income households continue to suffer from tougher economic times as inflationary pressures rise in comparison to the increase of monthly earnings.

A simple meal of ugali and sukuma wiki cost poor households about Sh5 more in June compared to January, an analysis of official data shows.

Similarly, low-income earners who rely on githeri (mixture of maize and beans) for lunch or supper are also paying Sh7 more compared to last June.

The growth in cost of a meal is even higher when fuel and cooking oil or fat prices are included, data by the Kenya National Bureau of Statistics  shows. 

KNBS data released on Tuesday shows Kenya’s CPI jumped from 185.47 in January 2018 to 204.34 in June 2019- a 10.17 per cent increase.

This is despite most employees’ salaries growing at a slow pace over the same period.

Over this period, low income CPI increased by 9.62 per cent putting an even bigger strain on low-wage households.

According to Mombasa-based economist Mihr Thakar, The slower growth in wages means that disposable income shrinks and the burden on individuals to support themselves and their families becomes heavier.

“If your salary did not rise by 10 per cent over the period then your purchasing power has been cut by 10 per cent,” he said.

Resultantly, Thakar said, individuals are now forced to live from paycheck to paycheck while searching for better bargains including moving to cheaper houses or buying substandard products to offset their budgets.

“As expenditure rises, individuals are eventually forced to support their lifestyles with a deficit filled by short-term loans, even if those lifestyles are very basic and frugal,” he said, adding that this partly explains the growth of small, personal digital loans.

He said increased borrowing among households adds onto the additional element of expenditure to the already overflowing household budget.

While a five per cent minimum wage increment was announced during last year’s May 1 Labour Day celebrations, the wage order was not realised until January 8 2019.

Moreover, during this year’s Labour Day celebrations today, Labour CS Ukur Yattani said there would be no increment on the minimum wage this year.

As at 2018, Kenya’s average minimum wage stood at Sh13,572 per month, a Sh645.45 increase from Sh12,926.55 per month in 2017. 

Thakar said there were several ways in which the government could ease the lives of consumers, the most prominent being the reduction of taxes to expand investment.

“But that goes hand in hand with reducing the budget deficit as a percentage of revenue (not just as a percentage of GDP),” he said.