The numerous on-going court cases on proposed wage hikes contained in various Collective Bargain Agreements (CBAs) in the tea sub-sector, which mainly pits workers’ unions against tea companies, have produced predictable clashes.
Unions argue, among other things, that the wages in the sector are low, while defenders of business, big and small, warn of dire consequences should there be any wage increases. It is true that, workers look up to high end-earners in other professions and have high expectations but production has not increased to allow above-inflation wage increases.
At the other end of the rung, the tea sub-sector boasts amongst the best-remunerated labourers in Kenya. Workers in the tea sub-sector draw higher wages than their counterparts in other cash crop industries such as coffee and floriculture despite pending pay rise deals.
According to newly published CBA statistics, tea workers get daily wages of about Sh450 compared to coffee (Sh422.50), floriculture (Sh315.97), and general agriculture Sh(269.40).
Non-cash benefits
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Non-cash benefits in the tea sub-sector include free housing, water, electricity, wood fuel, and training opportunities. Much of the industry now provides workers with pay and working conditions significantly above the agricultural workers’ norm.
Some labourers in Kericho earn approximately two and a half times the statutory minimum agricultural income in the country. Despite these positives, the biggest fear is that arbitrary wage increases as advocated by workers’ unions in the industry will result into cataclysmic job losses and business closures, and ultimately, an economy in ashes.
Indeed, there is no question that proposed changes as contained in the various CBAs proposed by the workers’ representatives from 2014, will put the success and competitiveness of Kenya’s tea industry in jeopardy.
If employees who are currently earning more than double the stipulated minimum wage are bumped up, this will likely create a ripple effect on the entire pay grid necessitating other increases that will ultimately make the sector unprofitable to investors.
In addition to a monthly wage, most tea companies also provide access to housing, annual leave pay, transport allowances and paternity and maternity leave to all permanent employees and their families.
The gap between wages in the tea industry and other agricultural sectors could widen further when the pending 2016-17 and 2018-19 CBAs are concluded. A cursory glance indicates that tea companies are not at peace, and the emerging structure of exaggerated tea wage-structure could negatively impact the sub-sector and lead to massive job losses.
What this means...
The same barriers and fears that have been expressed here in Kenya are routinely part of the debate in global supply chains too – that rising wage levels will result in increased layoffs and reduced hours.
It is the tea workers that ultimately lose from the uncertainty caused by the delay in implementation of CBS. They know the wage rates locally and expect a reasonable settlement. Unfortunately, it is their union representatives driving the demands.
It is important for unions to communicate facts to workers and not focus on raising hopes of reaching unrealistic settlements or justify their positions and blame employers when it is clear they should settle.
When there are prospects of a win-win of good wage settlement and a long-term job security. This should not be sacrificed at the alter of short-term results that make the unions look good but costs jobs.
Tea accounts for about 26 per cent of Kenya’s export earnings, and 67 per cent of the volume of tea traded at the Tea Auction Centre in Mombasa.
Despite the immense contribution tea production adds to the Kenyan economy, the sub-sector is grappling with increased costs of factor inputs, exemplified by the labour costs that have gone up an average of 200 per cent between 2001 and 2015.
As it is right now, labour costs already represent 50-60 per cent of the cost of production and any further increase of wages in the sector would push up the cost of production at a time when the price of tea is more than 20 per cent below its peak.
Workers’ representatives should ask these questions before barreling ahead with unsustainable CBAs.
Mr Opiyo is a communications tutor fred2odhiambo@gmail.com
