IEA Launches the Middle Class Study

Post Date: 15 December 2016   |   Category: Economic Growth   |   Hits: 3131

The Institute of Economic Affairs (IEA-Kenya) launched a report on the Middle Class on Thursday, 15th December 2016 at the Sarova Stanley Hotel, Nairobi. 

The study released by the Institute of Economic Affairs (IEA Kenya) notes that there has been an increase in employment in formal and informal employment. In 2009, there were 10.9 million jobs which increased to 15.2 million in 2015, representing a 42% increase over the period. A majority of the jobs in Kenya are however still in the informal sector. Out of the 10.9 million employees in 2009, 8.68 million were in the informal sector as compared to 2.03 million workers in the formal sector.
Informal employment is growing at a higher rate compared to the formal employment. From 2009 to 2015, workers in the informal sector increased by 45% to 12.56 million workers over the period. 
According to the study, income distribution for employees in the formal sector is negatively skewed, which implies that, a majority of the waged employees are low income earners. In 2015, individuals earning between KES 0 and KES 50,000 per month constituted 74% of all waged employees, while those earning monthly incomes between KES 50,000 and KES 100,000 per month represent 23% of all employees. On the other hand, the share of individuals earning above KES 100,000 monthly income is 2.9%. 
The report further reveals that  the number of employees falling within the middle class is observed to be on the general increase; rising from 166,515 people in 2009 to 272,569 people in 2015. The proportion of individuals below the middle class as a share of the total wage earners is also rising; it was 79.5% in 2009 and 86% in 2015. Individuals above the middle class have also reduced rapidly.
The rapid decrease in individuals above the middle class and the simultaneous increase in individuals in the middle class and those below the middle class imply that more individuals are getting concentrated in the lower income groups.
The nominal wages for the upper limit grew from KES 67,380 in 2009 to KES 109,429 in 2015. However, due to inflation, the real wage dropped from KES 66, 026 in 2009 to KES 63, 834 in 2015. Consequently, the size of the middle class marginally reduced.  From 2009 to 2015, the number of individuals in the middle class as a share of total increased from 8.5% to 11% in 2015 based on the nominal income ranges. However, after accounting for inflation, the share reduced to 7% and 10.5% in 2009 and 2015 respectively.
According to Kwame Owino, Chief Executive Officer at IEA, taxation of the middle class doesn’t reduce the size of the middle class since tax rate is increasing together with the share of the middle class. However, the tax rate is rising at a faster rate for a middle class individual, quipped Kwame.
Follow the link below to view the presentations made during the launch