Determinants of wage employment in kenya in the period 1973 to 2006

Abstract

The broad objective of this study is to analyze the determinants of wage employment in Kenya before and after introduction of liberalization and structural adjustment, suggest appropriate policy recommendations and provoke further study on labour market in general and wage employment in particular. The estimation results indicated that public sector spending on labour market policy, output per employee, annual average wage and index of employment protection legislation are important in determining variations in wage employment. The regression result further showed that public sector spending on labour market policy, output per employee, annual average wage, registered collective agreement and union membership covered by collective agreements as a percentage of total wage employment positively influence total wage employment while index of degree of coordination and index of employment protection legislation negatively affect total wage employment. The paper recommends that given the positive and statistically significant impact of productivity and public sector spending on active labour market on wage employment, there is need for improving productivity in all sectors of the Kenyan economy and increased government expenditure on labour market policy. In addition the study recommends that the government through policy and labour law regulations should guard against strict employment protection legislation as it significantly affects the total wage employment in a negative way.