A NOTE ON THE IMPACT OF UNIONIZATION ON NEGOTIATED WAGES IN THE MANUFACTURING SECTOR IN KENYA
| DOI | http://doi.org/10.1111/j.1468-0084.1977.mp39003005.x |
| Published date | 01 August 1977 |
| Author | CHARLES MULVEY |
| Date | 01 August 1977 |
A NOTE ON THE IMPACT OF UNIONIZATION ON
NEGOTIATED WAGES IN THE MANUFACTURING
SECTOR IN KENYA
By CHARLES MULVEY
In a recent article iñ this BULLETIN House and Rempel (1976) attempted
to 'bring additional evidence to bear' on the assertion 'that unions exert power on
employers to raise wages above the opportunity cost of labour to the modern
sector' (p. 111). There is some ambiguity about exactly what they are investigating
since, later in the article, the hypothesis to be tested is stated in terms which do not
correspond with the initial assertion which they seek to examine. However, most
of the discussion which precedes the empirical section of the article suggests that
their central purpose is to subject the assertion that unions raise wages above the
opportunity cost of labour to further examination. In this note it is contended
that:
they do not in fact bring additional evidence to bear on the assertion which
they suggest they are concerned with in the main text of the article;
they end up testing a hypothesis which is tangential to the central theme of
their discussion and this leads them to draw conclusions which could be
seriously misleading;
they confuse trade union 'power' with a geometric weighting effect;
they cite references in support of their approach which in fact do not sup-
port it.
House and Rempel suggest throughout the first two sections of their article that
they are concerned to discover whether unions have raised the wages of unskilled
labour in the modern sector above the opportunity cost of labour to that sector.
The 'opportunity cost of labour to the modern sector' can only mean, in this
context, the wage which would prevail in the absence of union activity and which
is more usually called 'the non-union wage' in the mainstream literature. This is a
useful and proper approach. But this is not at all what they in fact investigate.
What they end up examining is whether variations in negotiated wages of unskilled
labour in certain firms are associated with variations in the percentage unionized in
the industry to which these firms belong.
Unions may or may not have the effect of raising the wages of their members
above the wages of non-union labour (or labour not covered by union agreements).
It is an interesting and important question to discover whether or not unions have
established a union/non-union differential and the size of any such differential,
especially in the case of a country such as Kenya. The methodology for such an
investigation is simple and well known. The equation to be estimated is:
lnW1=aU1-i-bX1+e1 (1)
where W1 is the wage, U1 is union or non-union status, X1 is a vector of all other
variables which may affect wages and e1 is a stochastic disturbance term. a =
In (1 + A) where A is the percentage effect of unions on relative wages and is mea-
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