Workers’ real wages and policy choices

One thing is clear. Young professionals are taking a keen interest in the affairs of the state. And well they should, as I found out a few days later in a tax symposium, but that is a story for another day. Here is how the debate went.

One of the colleagues explained that a combination of high inflation outpacing salary adjustments, statutory payroll deductions, and stagnant productivity, eroded workers' purchasing power for five consecutive years.

The elevated inflation was driven by high global fuel prices and erratic weather patterns affecting food production. In addition, currency speculation, centred around the settlement of a $ 2 billion Eurobond severely weakened the Kenyan shilling in 2023, further driving up inflation.

The Covid-19 pandemic caused massive economic disruptions in 2020, forcing businesses to implement salary cuts, freeze hires, or lay off staff to stay afloat. These measures set a low wage baseline that failed to recover in tandem with subsequent inflation waves.

But even after the pandemic, businesses continued struggling with stagnant productivity. They faced high operational costs, a tight regulatory environment, and expensive credit lines. In addition there was a visible decline in national labour productivity.

The tight monetary policy did bring inflation under control. After five years (2019-2023) of declines in real wages, the improvements in 2024 were a much welcome relief for citizens.

The initial recovery of real wages in mining and quarrying, manufacturing, construction, wholesale, retail and repair of motor vehicles, information and communication did extend to agriculture and financial services in 2025.

Most workers are, however, yet to recover all the lost ground, one of the economists argued. That may take several quarters of sustained high growth. But now, with the war in the Middle East driving fuel prices high, that recovery is under serious risk. All this requires innovative policy choices. And so the discussion turned to those choices.

First, the young professionals rejected the framing of these economic issues as “us” vs “them” contests. When I asked them why, they nearly laughed me off my seat.

You politicians sell fear, anger and hope, they charged. You frame issues this way to persuade us that the actions of your opponents are a sinister plot to finish us! And that therefore we should get behind you in support as you do battle.

I was baffled. Of course, defining 'us' versus 'them' allows politicians to rally ethnicities or groups of citizens. The fights that politicians talk of are often with imaginary, if mortal enemies. In Europe and America, “them” is the immigrants, who are supposedly taking jobs from the natives.

Here at home, the divide is framed as opposition versus government, but more eerily, it pits ethnic groups against each other, or income groups against one another. The language is usually incendiary – “they are out to finish us”.

The group of Gen Z and millennials proceeded to educate me. It is clear that in humanity, often arbitrary, meaningless groupings can create prejudice. That is why the young people are rejecting the groupings created by politicians to define “us”.

If the issues are inflation, stagnant wages, caused in part cause by stagnant productivity, what if anything, can say county governments do about it? Plenty, the young professionals informed me.

For starters, counties should reduce the number of licences that small businesses require. They can also make the licences cheaper. They can assist with market linkages, they said. They can make the cost of credit cheaper. How? I enquired, protesting that some of these are national government functions.

Counties can improve the infrastructure for production, they insisted. That is what the county aggregation parks were all about. That led into a debate on whether the companies that want to operate in these aggregation parks have been identified, which best way to do so, and provide supportive services to assist then start.

Debate soon turned to the type of politics the young professionals want to see as we approach the next elections cycle. They were unanimous: Issue-based.

@NdirituMuriithi, an economist is partner at Ecocapp Capital, the advisory firm.