Earnings and Employment Sector Choice in Kenya
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Date
2010-06-14
Authors
Nyaga, Robert Kivuti
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
The level of participation in employment and wages paid in the labour market can be
assessed by comparing relative sectoral labour compensation amounts, participation
rates and skill distribution of the workforce. In addition, the level of participation in
employment and differences in wages paid in any given sector are affected by both
individual factors and sector-specific factors. The study estimates a multinomial logit
model and selection-corrected earnings models to determine participation and earnings
in various employment sectors. This study finds clear differences in the formal private
and public employment sectors relative to the vast informal sector. Regression results
confirm that education is the key determinant of both participation and wage earnings.
Attainment of higher levels of education is related to a greater likelihood of working in
private and public sectors and earning higher wages in these sectors, relative to working in
the informal sector. Gender disaggregated participation and earnings models show that in
contrast to men, university education has a considerable effect on women’s participation
and earnings in the formal sectors. Education attainment however, a primary factor in
participation and earnings determination, weakly explains participation in the typically
low-wage informal sector whose stable employment growth coincides with the stagnation
in the public and private sectors. Even with its characteristic low wages, to many job
seekers the informal sector is where jobs can still be found.