REVENUE BOOST

Manage workforce for wages to boost state’s development

Wages contribute to development, bloated wage bill just a rectifiable mistake

In Summary

• Wages are a tool for employers to retain staff and an incentive for workers. 

• Taxes are paid from wages, but a state should manage its wage bill to save for development. 

Nairobi county staff match outside City Hall on January 12
REDUCING WAGE BILL: Nairobi county staff match outside City Hall on January 12
Image: TRIZA KIMANI

While it is prudent to manage the wage bill to free money for development, it is equally important to recognise that pay contributes to economic development. One of the most important aspects of a job for most workers is the wage it pays. Wages allow workers to make a living from their labour.

They also provide incentives to be productive and loyal to an employer. In a broader sense, wages fuel the economy. For workers, wages are a primary source of income, along with smaller sources like government aid and investment income. Wages pay for essentials, such as rent, a mortgage, food and utility bills. To employers, wages are an important tool for retaining workers.

Low wages will save money on payroll, but a more competitive wage will give workers fewer reasons to leave for a job elsewhere. Misuse by state officials should not mean staff should be denied pay. Wages provide a means of reward, such as when an employer gives a raise based on a performance evaluation or issues a performance bonus.

 

Employees who earn a reasonable wage are more likely to feel valued by an employer, hence have more morale. Workers’ wages create jobs elsewhere by supporting manufacturers, retailers, service providers and financial institutions that help them manage their wealth.

Wages are also a source of tax revenue for governments. The more workers earn, the higher their taxable income and tax rate. Unemployed taxpayers must claim their unemployment benefits as income, but the limits on unemployment benefits mean they pay less in state and federal taxes than those who earn a steady wage.

Higher wages boost government revenue and provide more funding for services and new projects.

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