Discussion Paper No. 139 of 2012 on Effects of Minimum Wage on Gendered Employment in Kenya

Abstract

This study utilizes time series data to analyze the effects of minimum wage on females and males in formal employment in Kenya. Time series data from 1973 to 2009 is analyzed for long run and short run effects of minimum wages on males and females in formal employment. The results show that in the short run, minimum wage has a significant positive effect on female employment but the effect is significantly negative for male employment. In the long run, minimum wage has significant negative effect on both male and female employment. However, the long-run effect on female employment is not statistically significant. An increase in minimum wages has a smaller impact on female employment than male employment. Adjusting the minimum wages upwards is good in checking the gender disparities in employment in the short-run. However, the adjustments should be spread in such a way that the short-run positive effect on female employment is maintained in the long-run, while minimizing the negative effect on the male employment. Currently, the practise in Kenya is that adjustment is done every year mainly because of political agenda as opposed to policy. To minimize the long-run effects, the adjustment frequency should be reviewed to at least three years between adjustments. Nevertheless, minimum wage legislation in itself is a more general policy. A targeted policy to deal with the specific problem of the gender disparity in employment should be complemented with it in order to balance the number of males and females in formal employment in Kenya.