THE IMPACT OF UNIONIZATION ON NEGOTIATED WAGES IN THE MANUFACTURING SECTOR IN KENYA: A REPLY
| Date | 01 August 1977 |
| DOI | http://doi.org/10.1111/j.1468-0084.1977.mp39003006.x |
| Author | WILLIAM J. HOUSE,HENRY REMPEL |
| Published date | 01 August 1977 |
THE IMPACT OF UNIONIZATION ON NEGOTIATED
WAGES IN THE MANUFACTURING SECTOR IN KENYA:
A REPLY
By WILLIAM J. HOUSE AND HENRY REMPEL
In order to clarify some of the issues raised in Mulvey's note [8], it seems
necessary to summarize the main characteristics of the market for unskilled labour
in Kenya:
The existence of excess supply at the existing wage rate, i.e. unemployment
of unskilled persons;
Considerable divergence in wage rates as between different industries and
different firms within an industry;
A substantial rate of increase in wage rates in recent years despite the
existence of unemployment;
Stagnation in the volume of recorded employment.
The phenomenon of increasing wages in the face of considerable and
growing volume of unemployment is to be explained by the passage of suc-
cessive minimum wage laws and more recently by the power of trade unions to
wrest wage increases from the employers'. (1, p. 159)
It was to test this widely made latter assertion that our paper [4] was addressed.
On p. 116 we acknowledged that modem sector non-agricultural unskilled wages
are above the opportunity cost of labour from the urban informal and rural sector,
and quoted the earnings data in the ILO Report [5] to show this. The question at
issue, then, was not why modern sector firms pay above this opportunity cost-
they would be contravening the law if they did notbut why some firms choose to
pay wages well above the legal minimum for unskilled labour.' In particular, we
wished to test for the influence of union power, as measured by an index of unioni-
zation, on actual wages negotiated while, in addition, taking account of the other
factors that determine the modern sector wage structure, which compose the
elements in the X vector in Mulvey's equation [1].
Mulvey suggests that we could have used Johnson's [6] data to test the 'simple
and well known' model of his equation [1]. Yet a closer examination of the source
of the data shows this methodology to be inappropriate. These data were gene-
rated from a sample of African households in Nairobi [6, p. 13], many members of
whom would be employed in the informal sectorthe small-scale sector which is
largely unenumerated and unprotected by minimum wage lawswhere unions are
non-existent. Finding a union/non-union wage differential from such a sample
without controlling for the sector of activity and those factors which could influence
wages, such as market power, profitability and firm size, which in turn might
1Clearly. both the union and non-union modern sector wage would exceed the opportunity
cost of labour.
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