Minimum Wages in Kenya Mabel Andalón - Index of - IZA

wages. A different wage grid applies to agricultural employees and to workers in other
activities.
Evidence of the effect of minimum wages in Kenya is hampered by the scarcity of data.
In a descriptive paper, Omolo and Omitti (2004) find that the minimum wage policy in
Kenya has failed to contribute to sustained poverty reduction. Moreover, using aggregate
time series data they find a negative correlation between minimum wages and modern
private sector employment. This paper contributes to the literature of the effects of
minimum wages on the Kenyan labor market by: (i) examining the performance of the
legislation of minimum wages in Kenya, both in terms of its coverage and enforcement,
and (ii) estimating the effects on wages and employment using micro data. Our findings
based on the 1998/99 labor force data indicate that minimum wages were better enforced
and had stronger effects in the non-agricultural industry. More specifically, our results
suggest that (i) non-compliance affected one in four salaried workers in agriculture and
one in six in non-agricultural activities in urban areas, (ii) minimum wages were
associated with higher wages for low-educated workers and women in urban areas who
work in non-agricultural activities, while no such effects were found for workers in
agriculture, and (iii) higher minimum wages were associated with a lower share of
workers in formal activities, and a higher share of workers in self-employment in a given
occupation and location.
The rest of the paper is organized as follows: Section two describes the institutions for
minimum wage setting in Kenya. Section three presents the data used in this study.
Section four examines the enforcement and wage effects of minimum wages. Section five
and six report some estimates of its effects on the wage level and distribution and the
structure of employment, respectively. The last section concludes.
II. Institutions for Minimum Wage Setting
Minimum wages in Kenya are specified as part of a national wage policy set in place
before independence and guided by the Regulation of Wages and Conditions of
4