Employment and earnings during trade liberalization in Kenya

Using firm-level data, this study investigates employment and earnings in Kenya’s manufacturing sector in relation to firms’ trade orientation. Data was analysed using descriptive and regression techniques. The analysis shows that casual employment has increased—with 36% of all the workers being casual and part time workers in 2003. Generally, there has been a shift towards a more skilled workforce. Over 80% of workers are men. Export-oriented firms generally employed more workers on average, relative to non-exporting firms but the gap has narrowed. Casualisation phenomenon is not unique to exporting firms, although export-oriented firms employed more casual and part time workers by the virtue of their size. Empirical results show that exporting does not significantly influence the proportion of casual workers employed by the firms. Although panel data results for early 1990s data suggested a positive exporting effect (and a negative one for permanent employment), the empirical evidence is weak. Earnings are positively correlated with exporting. The exporting effect was particularly strong in the 1990s. However, this is no longer the case in 2003 once productivity factors are taken into consideration. Further, firm size and high skills in the form of university-level education have a positive impact on earnings. Additionally, permanent workers earned significantly more than casual workers. Overall, results depict structural shift between 1990s and 2003. Besides job creation, the quality of jobs created should also be a policy priority. Policy measures aimed at reducing earning disparities are vital. There is need to strengthen and strictly enforce labour regulations governing casual forms of employment.