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Kenya must get labour relations right

By Jacqueline Mugo | February 19th 2015

NAIROBI: The Labour market is one of the most important components of an economy. It is the mechanism through which a country allocates its most valuable and productive resources: human work, effort, creativity, and ingenuity.

It is through the labour market that human skills, supplied by individuals seeking to earn a living, are matched with the demand for labour by enterprises, governments, and households.

Therefore, the efficiency and performance of the labour market should be central to the priorities set by government, enterprises, and citizens in a country. Kenya aspires to attain a high-performing, efficient labour market. A labour market that generates jobs, has low unemployment levels, experiences a short duration of unemployment and has a highly productive workforce.

This will in turn generate tax revenues to government, give high wages to workers as well as grow and sustain businesses. In the labour market, the supposition is that free markets are imperfect, and an influential group may exploit the weaker group to its advantage.

At its inception, the labour market was dominated by the classical economics view which espoused free and unregulated labour markets. This “laissez-faire” capitalism led to social injustices and inequities. The organisation of workers and employers into trade unions and associations was a response to this.

These tripartite institutions of social dialogue, through which the parties in the labour sector define basic employment conditions irrespective of collective representation have helped to reduce social inequality and insecurity, particularly in crisis periods.

But unsurprisingly, labour relations systems in different countries mirror their uneven and diverse economic development. Different historical traditions also help to explain this unevenness and diversity.

The transition economies such as Kenya grapple with the challenge of building labour institutions befitting a market-oriented economy.

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The remarkable diversity of labour institutions, processes, and practices is further reflected in diverse national experiences with legal frameworks, observance of freedom of association, conduct of collective bargaining, dispute settlement, rules on unionisation and strikes, and tripartite relations.

Kenya is currently experiencing challenges in terms of creating employment opportunities for its citizens particularly the youth. National debates led by the government and the Salaries and Remunerations Commission (SRC) have been clearly painting the picture of the high and unsustainable labour costs especially in the public service.

The private sector has also put up a case that high labour costs are not only discouraging businesses from hiring more workers but affecting their bottom line as well.

To break this problem down, high labour costs can be seen as resulting from some combination of: overall compensation of workers, including wages and benefits, being high; productivity being low; and rigidities in the legal and institutional environment which prevent compensation and productivity from matching up more closely. By definition, high labour costs would result when total compensation of workers is out of sync with the productive contributions that these workers are capable of making to entreprises that would consider hiring them.

Studies have shown that irrespective of the level of development, the role of social dialogue and specifically employers’ organizations such as the Federation of Kenya Employers in contributing to economic and social development is acknowledged across countries.

Where social dialogue exist and functions well, it can help in shaping enterprise level relations that reinforce labour-management cooperation in the interest of employers, workers, and the national economy.

The current state of industrial relations in Kenya is challenging and its performance raises concerns. Since 2013, the labour market in Kenya is experiencing high incidences of industrial disputes that find their way to the Employment and Labour Relations Courts.

There is also a growing trend of attempts to disrupt the role of tripartite bodies leading to longstanding disputes that also end up at the Courts of Law. Labour relations does not function well in an atmosphere of strife, intolerance and over-litigation. There is also the alarming rate with which aggrieved parties are consistently ignoring court orders and even constitutional provisions.

Of particular concern, also, are strikes and other forms of industrial actions including strikes in essential services sectors such as hospital services, air traffic control, ferry services and some operations of the county governments.

This is in contravention of the provisions of the Labour Relations Act Cap 223 of the Laws of Kenya which prohibits workers from taking part in a strike or lock-out by the employer where the service interruption would probably endanger the life of a person or health of the population.

Unfavorable industrial relations have an adverse effect on the economy as they slow the pace of government in implementing its development agenda and erode the productivity and competitiveness of businesses.

A dominant feature of both the advanced and developing economies today is that economic policy has become more and more dependent upon a process of consensus building. The latter is largely contingent on the degree to which labour market partners, are integrated into the policy formulation processes.

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