Bangladesh business

Kenya pays factory workers twice as much as rival Bangladesh

Economy

Kenya pays factory workers twice as much as rival Bangladesh


Workers in a factory based in Thika. PHOTO | Marie Wambui

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Summary

  • The US-based Center for Global Development estimates the annual salary per worker in Kenyan industries at $ 2,118 (Sh218,154), which works out to Sh18,179 per month.
  • Tanzanian factories pay an average of $ 1,776 (182,928 shillings) per year, or 15,244 shillings per month, according to the study.
  • Kenya has adjusted the minimum wage to protect low-paid workers from inflation, despite fierce opposition from employers.

Workers in Kenyan factories earn more than double the average wage that Ethiopian and Bangladeshi industries pay their workers, even as global brands favor low-wage countries, according to a new study.

The US-based Center for Global Development estimates the annual salary per worker in Kenyan industries at $ 2,118 (Sh218,154), which works out to Sh18,179 per month.

Ethiopia’s sweatshop workers earn an average of $ 909 (Sh 93,627) or Sh 7,802 per month, while the salary in Bangladesh, famous for its vibrant clothing industry, is $ 835 (Sh 86,005). ) per year.

Tanzanian factories pay an average of $ 1,776 (182,928 shillings) per year, or 15,244 shillings per month, according to the study.

“Yet from a broader global perspective, their manufacturing workforce (Kenya) appears expensive compared to that of Bangladesh, a country with comparable income level and competitiveness rating,” the report said.

Kenya has adjusted the minimum wage to protect low-wage workers from inflation, despite fierce opposition from employers who argue that increases have not been matched to productivity levels.

The Kenya Employers’ Federation (FKE) has warned that unanticipated wage increases risk driving up the costs of doing business in the country and causing investors to flee or trigger downsizing to cut costs.

Kenya’s minimum wage is Sh 10,955 per month for a general laborer in the cities of Nairobi, Kisumu and Mombasa, where the cost of living is highest.

The US think tank used data from the World Bank to sample 5,500 companies in 29 countries on the basis of industrial labor costs and investment costs to measure productivity in sub-Saharan Africa relative to centers manufacturing like Bangladesh.

He says African coastal economies like Kenya, Tanzania and Senegal are at the forefront of industrial take-off.

“If countries were to feature in an African manufacturing take-off, one would surely expect these countries to be at the forefront,” the report says, but warns Kenya’s high wages could scare investors and lead them in Ethiopia.

Ethiopia’s low wages and investor-friendly electricity prices, four times cheaper than Kenya’s, have attracted manufacturers of global fashion brands like H&M and Guess.

In 2014, Kenya announced plans to reorganize its export processing zone at Athi River into a modern textile town, but this did not happen.

The plan had received commitments from major American fashion houses, including Calvin Klein, Timberland and Tommy Hilfiger, three years ago to open manufacturing workshops in Kenya.

High operating costs and an influx of cheaper imported products have caused a number of manufacturers to leave the local market and relocate their activities to other economies, resulting in job losses.

Procter and Gamble, maker of Ariel detergent, moved to Egypt while Colgate, Cadbury chocolate maker and Sameer Africa tire maker shut down in favor of imports.

The report indicates that the investment costs per worker in African companies are higher than in other manufacturing centers.

“Higher capital cost per worker, lower value added per worker, and relatively similar levels of human capital suggest that African firms have lower productivity and / or pay a higher premium for technology and access. to capital than comparison companies. “

Kenya’s investment cost per worker is the highest in the region at 1 million shillings, compared to Tanzania (591,220 shillings) and 632,111 shillings for Ethiopia.

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