To avoid wage bill escalation, find out what is ailing the economy

Kenyans walk in Nairobi's CBD. Photo/Monicah Mwangi
Kenyans walk in Nairobi's CBD. Photo/Monicah Mwangi

The issue of how much workers should be paid in terms of wages and remuneration in capitalist society is not a simple matter. And Kenya is a capitalist society.

This issue cannot be sorted out piece by piece, sector by sector, job group by job group or industry by industry. Somehow the whole economy needs to be looked at as a whole so as to understand the relationship between labour and capital, between wages and profits.

When an employer tells his worker, "I will only give you more money for your work when I can get value for my money" he simply means he will pay more if he is satisfied that he is going to make more profit. That means when the increased amount of money paid in terms of wages yields more value.

That is why Karl Marx and Friedrich Engels

came up with the "Labour theory of value" in studying capitalism so as to debunk the notion that workers were beholden to captains of industry for their livelihood. The real truth was that without labour there could be no capitalist society; and even were one to exist without caring for labour it would go nowhere.

Today

we live in a much more complex world; a world in which various economies are at different stages of development while, at the same time, they interact and interlock with each other. But there is one principle of economic and social interaction which seems to "over determine" a lot that happens in societies like ours when it comes to the relationship between labour and capital, or between workers and their employers. This is the principle of "global imperialism" or what, in polite language, is called "globalisation."

For example, we in Kenya do not manufacture Toyota vehicles: They are manufactured in Japan. In fact, were you to attempt to manufacture such vehicles, here you will simply reproduce another Japanese factory in Kenya "under licence" from the parent company. Your advantage may be two things — creating local jobs and getting some factor inputs locally. But by and large, to sell the vehicles in the local market, your price will already have been "overdetermined" from Japan.

At Independence, African countries faced this dilemma: they wanted to develop very fast and catch up with the West while also producing manufactured goods locally for the consumption of their people. So they created import substitution industries

(ISI) which essentially meant that they would make the Toyotas locally and sell them to our people at a price they could afford. In the meantime they would keep away, through stiff

tariffs and other protective measures, any cheap competitors from outside.

Very soon, however, it was realised that ISI was not realising its objectives: It was increasingly producing substandard goods and was still facing competition from cheaper and better goods smuggled from abroad.

So we abandoned ISI and opened our does to free trade and liberalisation. But I don't believe we thereby got the right model for our economic development.

In a study that I did for the United Nations University and the Third World Forum in 1979-81 on the experience with ISI in Kenya, I discovered, however, that the problem was not that simple. My conclusion was that, notwithstanding its possibilities of running into problems of poor quality due to absence of competition, this could be overcome through "Innovation over time" provided enough capital was available for technological innovation. Such Innovation, supported strongly by the public sector from the cottage industry level, would have laid down for us a stronger foundation for self-reliant development.

This study available in a book edited by Prof G. Ikiara and P. Coughlin entitled Strategies for Industrialization in East Africa. The

chapter I contributed which I am referring to here is entitled "Possibilities and Historical Limits for Import Substitution Industrialization in Kenya."

Why am I raising these issues we studied sometimes ago with regard to our debate on "the wage bill" in Kenya

today?

One, because I am convinced those issues are still as important

today

as they were then.

Two, because I am convinced we cannot tackle the matter of the wage bill simply as a "public sector" affair: The wage bill is "an economy wide" affair involving the private sector and the public sector. The amount of money the private lawyer charges an employee of the county government for services rendered is no different from that he charges the watchman from the UN. Just compare the salaries of the two: They probably went to the same school, graduated the same year and were employed without going for any other special courses.

But the UN employee is earning probably five times more than what the county employee is earning. Yet they have to live by buying the same commodities, in the same market and at the same price. Just think about that for a moment.

Three, in comes the tax man who will make the UN employee pay more in income tax than the county worker. But then comes other taxes like the fuel levy fund, the VAT and excise duties which do not care about your income differences: You will pay as you consume or as you seek to access any service. So when all these increase they have tremendous effects on the "buying power" of your wage, whoever you are.

Owners of business, or capitalists for that matter, have ways of circumventing the cost of living. But they, too, are put under tremendous pressure when they have to pay dearly for their raw material or the services they require to do business. This brings us to our FOURTH ISSUE: The cost of doing business in Kenya. It is unnecessarily too high at the moment. In fact, it is prohibitive.

When the price we pay for electricity goes up it affects all businesses, big and small, national and multinational, cottage or large scale, agricultural or industrial. In business when the cost of doing business shoots through the roof the first to suffer will be the worker: he or she will be laid off as employers begin "to rationalise" or cut their activities in accordance with the level of profits.

This is where the sharp conflicts between capital and labour will begin in earnest with strikes all over the place. We have witnessed strikes among nurses, airport workers and many more may follow. Our economy has been made more dysfunctional due to corruption which makes capital and technology seem more costly than they are due to the costs "added on" to be hived off into people's pockets.

So in order to deal HOLISTICALLY with the wage bill issue we need to answer the question: WHAT IS AILING OUR ECONOMY

TODAYAND WHAT DO WE NEED TO FIX IN ORDER TO AVOID FURTHER EXCALATION IN OUR WAGE BILL?