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Minimum Wages in Kenya

  • Andalón, Mabel

    ()

    (University of Melbourne)

  • Pagés, Carmen

    ()

    (Inter-American Development Bank)

This paper examines the performance of minimum wage legislation in Kenya, both in terms of its coverage and enforcement as well as in terms of their implications for wages and employment. Our findings based on the 1998/99 labor force data – the last labor force survey available – indicate that minimum wages, which, in principle, apply to all salaried employees, were better enforced and had stronger effects in the non-agricultural industry than in the agricultural one. More specifically, our results suggest that (i) compliance rates were higher in occupations other than agriculture, (ii) minimum wages were positively associated with wages of low-educated workers and women in non-agricultural activities, while no such relationship is found for workers in agriculture, and (iii) higher minimum wages were associated with a lower share of workers in formal activities in a given occupation and location. Our estimates indicate that a 10 percent point increase in the minimum to median wage ratio could be associated with a decline in the share of formal employment of between 1.2-5.6 percentage points and an increase of between 2.7-5.9 points in the share of self-employment.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3390.

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Length: 42 pages
Date of creation: Mar 2008
Date of revision:
Publication status: published in: Ravi Kanbur and Jan Svejnar (eds.): Labour Markets and Economic Development, Routledge, 2009
Handle: RePEc:iza:izadps:dp3390
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  1. David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
  2. T. H. Gindling & Katherine Terrell, 2004. "The Effects of Multiple Minimum Wages Throughout the Labor Market," William Davidson Institute Working Papers Series 2004-701, William Davidson Institute at the University of Michigan.
  3. Kevin Cowan & Alejandro Micco & Carmen Pagés, 2004. "Labor Market Adjustment in Chile," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  4. David Neumark & Mark Schweitzer & William Wascher, 2000. "The Effects of Minimum Wages Throughout the Wage Distribution," NBER Working Papers 7519, National Bureau of Economic Research, Inc.
  5. Rama, Martin, 1996. "The consequences of doubling the minimum wage : the case of Indonesia," Policy Research Working Paper Series 1643, The World Bank.
  6. Sara Lemos, 2004. "Minimum Wage Policy and Employment Effects: Evidence from Brazil," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  7. Oren M. Levin-Waldman, 1997. "Linking the Minimum Wage to Productivity," Economics Working Paper Archive wp_219, Levy Economics Institute.
  8. Stephen Devereux, 2005. "Can minimum wages contribute to poverty reduction in poor countries?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(7), pages 899-912.
  9. Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," CEP Discussion Papers dp0183, Centre for Economic Performance, LSE.
  10. Haroon Bhorat, 2000. "Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers," Working Papers 00041, University of Cape Town, Development Policy Research Unit.
  11. Patricia Jones, 1997. "The impact of minimum wage legislation in developing countries where coverage is incomplete," Economics Series Working Papers WPS/1998-02, University of Oxford, Department of Economics.
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