Wage Determination in the Unionized Private Sector in Kenya, 1980-1997

Odhon'g, Jacob Omolo (1999) Wage Determination in the Unionized Private Sector in Kenya, 1980-1997. Masters thesis, Kenyatta University.

PDF (Wage Determination in the Unionized Private Sector in Kenya, 1980-1997) Omolo, Odhon'g Jacob.pdf - Accepted Version Restricted to Repository staff only Download (32MB) | Request a copy

Abstract

This paper analyses the determinants of real wages in the unionized private sector in Kenya from 1980 to 1997. Despite the existing wage policies being enforced by the Kenya government through its various machineries such as the Industrial Court and continued union representation of workers in collective bargaining, real wages of unionized private sector workers have continued to fall overtime. In the period 1980-97, real wages of unionized private sector workers fell by 36.84 percent despite an overall improvement in the private sector real wages of 11.34 percent during the same period. Unionized workers were therefore 48.18 percent worse off than their non-unionized counter-parts in the same sector. The main objective of this study was to find out factors that determine unionized private sector real wages in Kenya. Empirical analysis was carried out using time series secondary data to determine how various factors affect negotiated real wages. These factors included one year lagged negotiated real wage, statutory minimum real wage, union strength, real GDP growth, labour productivity, tax rate, rate of interest on capital and its one year lagged effect, and a dummy variable to capture the effect of wage guidelines. Using Two Stage Least Squares (2SLS) regression technique, the parameter estimates of one year lagged negotiated real wage, statutory minimum real wage, rate of interest and its one year lagged effect were found to be statistically different from zero at the 10 percent significance level. However, when the results were analysed at 95 percent confidence level, coefficients of all the variables above remained to be statistically significant except that of current rate of interest. The rest of coefficients of the variables in the model namely, union strength, real GDP growth, labour productivity, tax rate and the dummy for wage guidelines were found to be insignificant both at 90 and 95 percent levels of confidence. The regression results further showed that lagged real wage, statutory minimum real wage, union strength, tax rate and the dummy for wage guidelines were positively related to the negotiated real wage. However, real GDP growth, labour productivity growth, rate of interest and its one year lagged effect had a negative relationship with negotiated real wages. The major policy implication of the study results is that statutory minimum wage regulation is one of the effective ways of improving negotiated real wages in Kenya. The study recommends therefore that this practice should continue and be effectively implemented. Furthermore, since labour and capital have been found to be coprant factors, efforts should be made to reduce interest rates in order to attract more investments. This will lead to high demand for labour which in turn bids up wages. Also, the existing wage policies should be reviewed to incorporate interest rate movements as an additional factor for wage compensation.

Item Type:	Thesis (Masters)
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HN Social history and conditions. Social problems. Social reform
Divisions:	Africana
Depositing User:	Tim Khabala
Date Deposited:	18 Dec 2017 09:11
Last Modified:	18 Dec 2017 09:11
URI:	http://thesisbank.jhia.ac.ke/id/eprint/2970

Actions (login required)

View Item