Determinants of Employment in the Formal and Informal Sectors of the Urban Areas of Kenya
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Date
2010-04-05
Authors
Wamuthenya, Wambui R.
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
By applying a multinomial logit model and economic theory to labour force survey
data, this study examines the determinants of formal and informal sector employment
in the urban areas of Kenya. The fi ndings show that the determinants of employment in
public, private and informal sectors of Kenya’s urban labour market vary by age cohort
and gender. Special emphasis is placed on the importance of sex (being male rather than
female), marital status, household-headship and education variables, of which the fi rst
three illustrate the disadvantaged position of women in the labour market. Education has
the strongest impact on formal sector employment, yet most women work in the informal
sector despite signifi cant improvements in their education attainment.
Two observations merit concern, high youth unemployment and gender imbalance in
access to employment. Unemployment is particularly high amongst women, especially
younger women. Younger women are either unemployed or employed in the inferior
informal sector (in the sense of low income, precarious and unregulated forms of
employment), as opposed to males in a similar age bracket who are likely to work in
the private sector.
Overall results confi rm that the urban labour market is heterogeneous and reveal how
labour supply factors are valued in the labour market. They also indicate the existence
of sex discrimination in the labour market. The study raises the following questions
for further research while identifying education and employment policy gaps: What
specifi c skills or qualities do employers look for when recruiting new employees? Are
the recruitment practices gender balanced? Which training and skills are sought for
what sectors? Is the current education system demand or supply driven, and does it
equip graduates with adequate skills to become self-employed? Does the current policy
environment and infrastructure encourage self-employment? What are the real constraints
faced by women in fi nding reasonable work given their remarkably high unemployment
rates? Answers to these questions have broad policy implications towards an achievement
of gender balance in education, the labour market and poverty eradication.