Kenyan workers face wage erosion in common market

Kenyan professionals may be headed for a period of wage turbulence as the labour market finds its supply and pay structure balance after Thursday’s launch of East Africa’s Common market, economists said.

Top officials in what is billed as Africa’s most advanced regional integration project reckon that although Kenya, which has used its relatively longer period of political stability to build a stronger human capital base, is primed to lead the supply of manpower that firms need to expand their operations across the region, the country’s professionals could also suffer pay erosion as the market finds its equilibrium.

“It is a fact that Kenya’s economy is endowed with highly trained professionals and this has caused a lot of sensitivity in other countries, whose citizens fear losing jobs to the Kenyans,” said Mr Juma Mwapachu, the EAC Secretary General.

“But job seekers in Kenya (where wages are highest) must also be prepared to accept that there are many professionals from the region with the same qualifications, who will be willing to accept local jobs at much lower pay pulling down wages or stopping their upward movement,” Mr Mwapachu told journalists in Nairobi last week.

The Common Market protocol seeks to immediately liberalise seven groups of service sectors for easy access by job seekers in the region.

Top on the list are business-related services such as advertising, architectural, accountancy, legal and computer services.

The protocol also seeks to immediately open up competition for jobs in communication, distribution, education, tourism, transport and financial services.

Opening up of markets should help nations ride the wave of increased demand for professional services in the 127-million-people-economy and a combined GDP of $73 billion that is also tipped to attract huge foreign investor interest.

Kenya’s export of professional services is expected to increase by large margins with the launch of the Common Market, adding impetus to the growth of cross-border trade that last year saw the country earn about Sh150 billion from exports of services, according to the Export Promotion Council.

Labour market analysts however warned that cross-border movement of professionals such as teachers and accountants could cause pay trouble, citing huge differences in wages across the region.

Kenya, which is East Africa’s biggest economy, pays the highest wages, raising fears that its nationals seeking employment in neighbouring states may expect similar remuneration, laying the ground for a conflict with employers.

Some labour economists however said such a push may not happen because the cost of living in the different markets could be such that one may move out for less pay but maintain the same level of living standards.

John Musunga, the managing director and general manager, pharmaceutical operations for East Africa at GlaxoSmithKline (GSK) said some professionals might be forced to take pay-cuts to get jobs in the region without much pain.

“There certainly are salary disparities in the various countries and if one was to move from one market to another, remuneration determinants such as salary market data, salary competitiveness, inflation and internal job evaluation will come into play, ” said Mr Musunga. “It may mean that someone takes a cut in Kenya shillings but really retains the same level of living in the foreign country.”

Employers said relaxing restrictions on movement of labour should ease access to human capital, the one arsenal that businesses need for growth and expansion in the region. Full Story

Source: www.businessdailyafrica.com

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