Employment potential in urban informal sector: a case study of garages in Nairobi

Abstract

Employment promotion plays a central role in promoting a country's development goals. It links economic growth and distribution of income with alleviation of poverty. In an effort to solve the unemployment problem many developing countries have often found themselves in a dilemma. In particular, Kenya has been unable to solve this problem since independence. The continuous rural-urban migration had made this impossible for Kenya, especially in the urban city of Nairobi. The modern sector alone is not capable of absorbing all the migrants. Most of them end up in the informal sector either for the purpose of seeking training or for the purpose of employment. It appears that the burden of employment promotion in the urban economy is gradually shifting to the urban informal sector activities. The study is focused on the employment potential of urban informal garages in Nairobi. Econometric methods are applied to data from sixty-nine garages in three different areas: Informal, formalized, and formal garages. The data was obtained through fieldwork undertaken in Nairobi in these three areas in the months of April and May 1989. The analysis of the data showed that the factors that --. influence employment in the urban informal and formalized garages are investment, capital stock, education of the proprietors, (vi) experience of the proprietors, demand for garage repairs and services, and net income or the returns from invested capital. The study reveals that there are strong relationships between employment and capital stock, demand and experience, with all the factors positively related to number of vehicle repairers engaged in each type of garages. An interesting result of this study is that urban informal sector garages have great potential for employment. With the modest capital stock, some garages are engaging an average of 13 vehicle repairers, contrary to results of earlier surveys e.g. Ndua and Ng'ethe (1984) and the CBS' (1983) that the informal sector is one person's affair.