Institute for Development Studies, University of Nairobi

Unemployment is one of the most pressing problems in Kenya. Some remedial measures have been undertaken. The Tripartite Agreements of 1964 and 1970 purported to use the collective bargaining process to augment employment. Both achieved this objective in the short run. Neither had long-lasting effects on the situation basically because they, perhaps inadvertently, tried to induce extra-market behaviour. No positive economic incentives were incorporated in the Agreements. The initial capital investment allowance, refund of customs duty on imported capital goods, and accelerated depreciation allowances amount to a substantial subsidy on capital so that capital-labour ratio is higher than would be the case otherwise. An attempt to counteract this by an Employment Allowance or similar subsidy on labour is opposed for fiscal reasons. It is recommended that the subsidies on capital be overhauled. It is in the business interest to expand employment for such reasons as maintenance of a buoyant market and preservation of social and political stability which are ingredients in "investment climate". From a broader viewpoint, comparative cost doctrine dictates that a capital short economy should use the abundant factor -labour - more widely than it does capital. Of the three possible means of effecting a less unequal income distribution, namely institution of unemployment benefits, steeply progressive income tax, and provision of employment for those able and willing to work, only the last policy instrument has reasonable prospects of achieving the desired end. Businesses can implement several measures in an endeavour to augment their work forces. They can, wherever possible, readjust their production techniques toward more labour intensity; utilise excess capacity by introduction of shift work; alter skill composition when that results in lowering or maintaining the same output-cost ratio but increasing the number of persons engaged; develop their markets with the aim of tapping the "mass" market; and apply objective criteria in job placement so as to maximise allocative efficiency and demand for supportive or auxiliary personnel. In a nutshell, business can play a vital role in combating this problem of unemployment by, for example, sacrificing their privileged fiscal position and by implementing positive programmes for this purpose.