Kenya's growth masks poor pay, rising taxes and falling incomes

Workers in the agriculture, forestry and fishing sector, which contributes the lion’s share to the country’s Gross Domestic Product (GDP) at 23 per cent in the latest Economic Survey report, are struggling to afford the same food items they produce and process.  

Earnings for people employed in the sector have been on downward trend over the last five years compounded by rising inflation, climate related shocks and government deductions through higher taxes and other levies.  

As Kenyans struggle to make ends meet under a heavy tax burden, they are also contending with reduced spending on critical services such as health and education, as the government allocates a huge share of revenue to paying public employees, with the wage bill now nearing Sh1 trillion.

The public sector wage bill stood at Sh935.47 billion in 2025, an increase of 8.8 per cent from Sh881.39 billion in 2024.

The funds were used to compensate about 1.07 million government employees across various entities, including parastatals, ministries, and county governments.

The government workforce, which has grown from 937,800 people in 2022, has been described as bloated, with audits in several departments flagging cases of ghost workers on payrolls.

The cost of servicing the country’s elevated debt has further strained public finances. Debt servicing now accounts for about 60 per cent of revenue, meaning that for every Sh100 collected, Sh60 goes towards loan repayment, leaving just Sh40 for other services, including salaries.

Despite billions of shillings channelled into the agricultural sector, the impact is yet to be felt by workers downstream.

A recent report shows a steady decline in real average wage earnings over the past five years.

Although allocations have averaged Sh50 billion annually, employees in the agriculture, forestry and fishing sector have seen their purchasing power eroded by persistent inflation.

This predicament also affects employees in the transport and storage, real estate and accommodation and food services sectors.

The decline in real wages comes on top of new and higher statutory deductions, including the 1.5 per cent Affordable Housing Levy, a 2.75 per cent Social Health Insurance Fund contribution and increased National Social Security Fund (NSSF) contributions.

Disposable income

High-income earners have also seen their take-home pay shrink following changes in Pay As You Earn (PAYE) tax rates. Workers earning above Sh800,000 per month are now taxed at 35 per cent, up from the previous ceiling of 30 per cent.

Collectively, these measures have significantly reduced the disposable income of many Kenyans.

Real wage is an index used to show how a worker’s income has been adjusted for inflation over time. A decline indicates that purchasing power has been eroded, as earnings are not keeping pace with rising prices, while growth suggests improved capacity to manage inflation.

While the total real average earnings per employee in both the private and public sectors rose to Sh678,795 in 2025 from Sh665,418 in 2024, the 2026 Economic Survey published by the Kenya National Bureau of Statistics (KNBS) shows that workers in the highlighted sectors—across both public and private spheres—have not experienced meaningful income growth.

“In 2025, the real average earnings per employee reached Sh678,800, up from Sh665,400 in 2024. The private sector recorded a growth of 3.9 per cent, with earnings rising to Sh716,100. In contrast, the public sector registered a decline of 2.2 per cent, reducing real average earnings to Sh600,000 during the same period,” the report states.

Earnings for agriculture sector workers have continued to decline despite ongoing State-backed programmes such as subsidised fertiliser and other agricultural inputs, which have been prioritised under President William Ruto’s administration.

The Economic Survey 2026 further shows that even as the agriculture sector absorbs more workers, incomes continue to shrink, despite billions of shillings injected into the industry. In 2025, the sector employed 311,900 people, up from 308,900 in 2024, 302,400 in 2023, and 299,700 in 2022.

However, the report indicates that estimated real average wage earnings in private agricultural enterprises have been on a steady decline—from Sh321,034 in 2022 to Sh302,572 in 2023, Sh300,081 in 2024, and Sh298,559 in 2025.

Food security

On the public sector side, the trend mirrors that of the private sector. Average wages declined from Sh421,478 in 2022 to Sh398,195 in 2025, translating into a drop in monthly earnings from Sh35,123 to Sh33,182.

President William Ruto’s fertiliser subsidy programme remains one of the key budget lines that has consistently attracted billions over the years, aimed at safeguarding food security and improving farmers’ take-home earnings.

In the 2023/24 budget cycle, then National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u allocated Sh49.9 billion to the agriculture sector.

Of this, Sh5 billion went to the fertiliser subsidy programme, Sh8.6 billion to the National Agricultural Value Chain Development Project, Sh2.7 billion to the National Agricultural and Rural Inclusivity Project, Sh2.1 billion to the Kenya Cereal Enhancement Programme, and Sh2.8 billion to emergency locust response, among other allocations.

As this marked President Ruto’s first full budget cycle, there was optimism that the investments would not only strengthen the sector but also lift economic growth from 4.8 per cent in 2022 to 5.5 per cent in 2023.

“The growth will be supported by broad-based private sector-led expansion, including continued strong performance of the services sector and recovery in agriculture due to improved weather conditions during the March–May rainy season,” said Ndung’u.

In 2024/25, the Treasury allocated Sh54.6 billion to the sector, with Sh10 billion going to the fertiliser subsidy programme.

In the 2025/26 budget, current National Treasury Cabinet Secretary John Mbadi allocated Sh47.6 billion to the sector, with Sh8 billion set aside for fertiliser subsidies, Sh10.2 billion for the National Agricultural Value Chain Development Project, Sh800 million for the Small-Scale Irrigation and Value Addition Project, Sh1.2 billion for food security and crop diversification, and Sh5.8 billion for the Food System Resilience programme.

In the latest report by KNBS, the agriculture, forestry and fishing sector expanded at a slower pace of 2.8 per cent in 2025, compared to 4.4 per cent in 2024. However, its contribution to the country’s Sh17.6 trillion GDP increased from Sh3.6 trillion to Sh4.1 trillion.

“The agriculture sector’s contribution to GDP increased to 23.2 per cent in 2025, compared to 22.4 per cent in 2024,” the report states.

Other key sectors contributing to GDP in 2025 included transportation and storage (11.8 per cent), financial and insurance activities (8.3 per cent), real estate (8.2 per cent), wholesale and retail trade (7.8 per cent), manufacturing (7.1 per cent), construction (6.5 per cent), and public administration and defence (4.9 per cent).

The 11.8 per cent contribution from transport and storage represents a decline from 12.7 per cent in 2024 and 13.2 per cent in both 2023 and 2022.

Similarly, real estate’s share fell to 8.2 per cent from 8.4 per cent in 2024 and 2023, 8.5 per cent in 2022, and 9.0 per cent in 2021.

The KNBS data further shows that estimated real wages in these sectors have also declined over the past five years, despite their significant contribution to GDP.

Geopolitical developments

In the transportation and storage sector, estimated real average wage earnings per employee in the private sector fell from Sh1.31 million in 2022 to Sh1.26 million in 2023, Sh1.24 million in 2024, and Sh1.2 million in 2025.

In real estate, average real wages declined from Sh284,388 in 2021 to Sh272,987 in 2022, Sh262,711 in 2023, Sh260,291 in 2024, and Sh256,413 in 2025.

The accommodation and food services sector, which has a close link to agriculture, also recorded a decline, with average real wage earnings per employee standing at Sh342,525 in 2025 compared to Sh389,821 in 2021.

Despite the decline in wages across several key economic sectors, others recorded notable growth.

Manufacturing stood out, with estimated real average wage earnings per employee rising by 18 per cent to Sh600,571 in 2025, up from Sh508,380 in 2024.

Earnings for workers in the financial and insurance activities sector also increased to Sh1.79 million in 2025 from Sh1.69 million in 2024. Real wages in administrative and support service activities rose to Sh1.37 million last year, from Sh1.27 million in 2024.

Outside the domestic labour market, Kenyans working abroad have also been affected by shifting global policies shaped by recent geopolitical developments.

This has been reflected in a decline in diaspora remittances, which the Ruto administration has heavily relied on to boost foreign exchange inflows. Kenyans in the diaspora sent home Sh661.2 billion last year, a decline of about two per cent from Sh674.1 billion in 2024.

The drop comes despite the government’s push to expand overseas employment opportunities, including the signing of bilateral labour agreements with various countries.

Locally, the government has targeted the creation of over one million jobs annually but has consistently fallen short of the goal.

In 2025, the economy generated 822,100 new jobs, an improvement from 782,300 in 2024, but still below the presidential target of one million jobs per year.

Largest employer

This pushed the total number of Kenyans in employment to 21.6 million. A majority—18.1 million or 83.8 per cent—are in the informal sector, which has long decried limited government support while also remaining largely outside the tax net, leaving formal sector workers to shoulder a heavier tax burden.

Manufacturing remained the largest employer last year, with 366,600 workers. Jobs in the sector also recorded the biggest increase compared to other sectors, rising by 5.6 per cent from 347,300 in 2024.

Despite this, the sector has continued to face declining fortunes, marked by the exit of major manufacturers and the downsizing or closure of local firms.

Manufacturers cite the high cost of doing business, including expensive energy, poor infrastructure, and an unpredictable tax regime, which they say has undermined competitiveness both locally and in export markets.

As a result, the sector’s contribution to GDP has gradually declined to 7.1 per cent in 2025, down from 11.3 per cent in 2010 and even higher levels in the 1990s and early 2000s. It stood at 7.7 per cent in 2022 when President William Ruto took office.

The sector has long aspired to raise its contribution to 20 per cent of GDP by 2030, but stakeholders note that achieving this target will require addressing key structural challenges.

“A manufacturing GDP contribution of 20 per cent by 2030 should yield at least one million jobs. This highlights the need for government support and strategic policies to expand the sector and maximise employment opportunities,” said the Kenya Association of Manufacturers in its Manufacturing Priority Agenda 2026.

Other key employers, according to the Survey, include agriculture, which directly employed 311,900 people but recorded muted growth of 0.9 per cent in 2025. Wholesale and retail trade, including repair of motor vehicles, employed 281,000 people.

The education sector also remained a major employer, with 251,100 workers, and grew by 3.5 per cent last year. Construction, among the few sectors to register strong expansion in 2025, employed 228,200 people, with jobs in the sector rising by 2.1 per cent.