Inflation and Wage Equity among Government Employees in East Africa: A Cross-National Dynamics Analysis

Abstract

This study examined the relationship between wage equity, measured by the Wage Equity Index (WEI), and inflation (INFL) across five East African countries, Kenya, Tanzania, Uganda, Rwanda, and South Sudan, over the period 2013 to 2024. The study was anchored in two theories: wage indexation theory and institutional economics theory. Using a panel dataset of 60 observations, the study employed descriptive statistics, correlation analysis, and two-way fixed-effects (TWFE) regression to assess both country-specific and time-specific effects on wage equity. The findings reveal that inflation exhibits a negative, though statistically insignificant, relationship with wage equity, suggesting that short-term price fluctuations have a limited impact on wage fairness. In contrast, temporal trends demonstrate a consistent and significant improvement in WEI, highlighting the role of long-term structural, institutional, and policy-driven factors in promoting equitable wage distribution. These results underscore the importance of labour market reforms, regional integration, and socioeconomic development initiatives in sustaining wage equity across East Africa. The study recommends that policymakers continue to strengthen institutional mechanisms, harmonize employment standards, and expand social protection programmes to ensure that the observed improvements in wage equity are maintained. This research contributes to the understanding of wage dynamics in developing economies and provides evidence-based insights for regional labour policy formulation.