THE POLITICS AND ECONOMICS OF THE 1979 TRIPARTITE AGREEMENT IN KENYA: A NOTE

J. T. MUKUI

THE 1979 Tripartite Agreement was the third agreement in Kenya between the Kenya Government, the Federation of Kenya Employers and the trade Unions (Cotu). The 1964 agreement stated that 'in acceptance of the fact that the unemployment problem has now become so serious as to constitute a national emergency, and while realising that the ultimate solution lies in the implementation of long-term plans to create a developing economy, we have agreed that there is an urgent need for immediate relief measures designed to create breathing space during which such long-term plan can be established.'1 Under the 1964 Agreement, unions accepted a wage freeze for one year, while private employers agreed to expand employment by 10 per cent and the Government by 15 per cent. In the 1970 Agreement, the Government and private employers agreed to expand employment by 10 per cent of their regular establishment and employees accepted a 12 months' wage standstill; it was also agreed that there would be no strikes nor lockouts during the Agreement.2 The 1979 Agreement, announced by the President on 12 December 1978, was to be effective from 1 January 1979 and stated that both the private and public sectors would increase employment by 10 per cent. However, unlike the 1970 Agreement, the 1979 Agreement did not expressly assert that there was to be a wages standstill. It only stated that unions should exercise restraint with respect to demand for wage increases. It soon became clear that the trade unions' understanding of the term 'wage restraint' was quite different from that of employers who took it to mean a total wage freeze.3 The original announcement did not say whether strikes were to be outlawed during the period covered by the Agreement. The Minister for Labour later said that 'Kenya is not a rich country. She cannot afford the luxury of strikes and lockouts It is our hope, therefore, that strikes and lockouts are a matter of the past' 4 That ceased to be just a hope; the Government made it very clear that there were to be no strikes and lockouts during the period of the Agreement'
This paper was originally prepared for tbe Kenya Presidential Commission on Unemployment in July 1982. Dr Mukui was a Junior Research Fellow at the Institute for Development Studies, University of Nairobi; he is now working for the Kenya Commercial Bank. 1. Reprinted in Kenya, Ministry of Labour and Social Services Annual Report, Government Printer, Nairobi, 1964. 2. Reprinted in Kenya, Ministry of Labour Annual Report, Government Printer, Nairobi 1970. 3. Weekly Review (Nairobi), 9 February 1979. 4. Weekly Review (Nairobi), 9 February 1979. 5. Standard (Nairobi), 10 February 1979.

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A number of scholars have alluded to the relative powerlessness of trade unions in Kenya due to the various government regulations on trade union behaviour.6 For example, the use of the ultimate bargaining weapon, the right to strike, was outlawed in August 1974; and the 'wage guidelines', which are annually revised directives from the Finance Minister to the Judge of the Industrial Court, set quantitative limits to wage increases. In announcing the 1979 Tripartite Agreement, the President said that 'after discussions with the employers' organisations, agreement has been reached to increase wage employment by 10 per cent in the private and public sectors'; this form of words in effect means that the employers, on the basis of their enlightened self interests, favoured it He continued: ' . . . I hope our trade unions will recognise the importance of ensuring the success of this agreement'; these words in effect mean that, as far as trade unions were concerned, the agreement was not voluntary. Cotu later confirmed that it was bulldozed into signing the Tripartite Agreement.7 There is a considerable body of economic literature on tripartite agreements in Kenya and other developing countries. The 1972 ILO report on Kenya analysed the 1964 and 1970 agreements and concluded that they were a palliative but did not bring any deviation from the long-term trend in employment growth.8 Their effect was primarily to bring forward recruitment which could in any case have been undertaken within a year or so. The Report showed that it was simple for employers with casual employees to substitute regular employees for them so that reported regular employment rose without much effect on actual employment creation. The general conclusion was that both tripartite agreements generated shortterm employment which had no lasting effect Those who had been forced to provide more employment than they needed were waiting for natural wastage and expansion to absorb it. The ILO report concluded that 'such short-term measures used up such good will and administration as there is, and have virtually nothing to contribute to the solution of the long-term problem. Indeed these agreements may even be counterproductive in leading employers to reduce their permanent labour force so as to reduce their commitments under them'.' The effect of a tripartite agreement on wages is not clear. However, it is likely that because trade unions agreed to a wage freeze, there was no chance of a spectacular rise in wages to cancel out the effect of the freeze. The

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6. For an empirical analysis of the influence of trade unions on wages, see H. Rempel and W. J. House, The Kenya Employment Problem: an analysis of the modern sector labour market (Oxford University Pre**, 1978). 7. Weekly Review (Nairobi), 9 February 1979. 8. International Labour Office, Employment, Incomes and Equality: a strategy for increasing productive employment in Kenya (Geneva, 1972). 9. ILO, Employment, Incomes and Equality, p. 543.

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government may even intervene to prevent the catching up process. In this respect, the introduction in July 1971 (just before the expiry of the second Tripartite Agreement) of the Trade Disputes (Amendment) Act, which contained restrictions on the right to strike, is of significance.10 The 1964 Agreement was accompanied by a price freeze. In the 1970 Agreement, the Government agreed to review both the rent control and the prices of certain consumer goods and services, but the Agreement expired before any meaningful work could be done to control prices. There was no increase in prices in 1964 and in 1970 prices rose by only 4 5 per cent Unlike 1964 and 1970 when price rises were very modest, inflation in 1979 was 13 per cent If real wages were frozen then, the Industrial Court would have to allow wage increases to cover increases in the cost of living. This makes nonsense of the Agreement because, since 1973, wage increases have not kept up with cost-of-living increases and freezing real wages would have meant a higher rate of increase in wages than previously, which would have crippled the industrial sector because it was at the same time required to expand employment. I am not suggesting there should be a price freeze. An analysis of the price freeze that accompanied the 1964 Tripartite Agreement showed that after the freeze, there was a catching up process that eroded the success achieved during the period of the freeze.11 Damachi claims that a tripartite agreement is likely to encourage a higher rate of rural-urban migration.12 Although he does not give any empirical evidence or theoretical base for his claim, his proposition can be deduced from Todaro's migration model.11 The Todaro model is used to demonstrate the continued existence of rural-urban migration in the face of rising levels of urban unemployment According to Todaro, the individual's decision to migrate depends on (a) the existing urban-rural wage differential, and (b) the probability that he will be successful in securing an urban job. Assuming that income differentials remain the same, the announcement of a tripartite agreement is likely to speed up rural-urban migration because it raises an individual's perception of his probability of securing a job. However, we should be careful about applying Todaro's Model of ruralurban migration in the study of tripartite agreements. In his model specification, Todaro uses the actual or objective probability. Within the domain of tripartite agreements, my argument is that, regardless of whether the agreement is successful or not in creating employment, an agreement will still cause migration to the urban centres since the subjective probability of finding
10. R. Sandbrook, Proletarians and African Capitalism: the Kenya case, 1960-1972 (Cambridge University Press, 1975), p. 45. 11. J. T. Mukui, Price Controls in Kenya (MA. thesis, Department of Economics, University of Nairobi, 1978), p. 34. 12. In U. G. Damachi, Guy Routh and A. R. E. Taha (eds.), Development Paths in Africa and China (Macmillan, 1976), p. 178. 13. M. P. Todaro, 'A Model of Labour Migration and Urban Unemployment in Less Developed Countries', American Economic Review, 44 (1969), pp. 138-48.

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employment is more relevant here. The subjective or personalistic interpretation of probability is a view of probability as a numerical expression of personal judgement or belief with respect to a particular proposition.14 This implies that, with the announcement of a tripartite agreement, a migrant's personal belief about the chance of getting a job may exceed the actual probability. If potential migrants are well informed about the actual probability of getting a job in the urban labour market employment lottery, it is clear that there would be less rural-urban migrants. Previous studies have shown that a populist policy within a predominantly market economy tends not to work, except temporarily. For example, there was a price freeze in 1964 accompanying the Tripartite Agreement, and another in late 1971. An economic analysis of the 1964 price freeze showed that the price freeze worked, as long as it lasted. After the price freeze, prices readjusted through the market mechanism to undo the effects of the freeze. This was also the case with the 1971 price freeze." These policies do not work because market forces are too numerous and strong to be more than temporarily subdued by attempts at controls. The same policies, imposed in a different economic system, might work. There is almost a consensus of opinion in Kenya that tripartite agreements do not achieve what is expected of them. The Ministry of Labour, who are the executors of the agreements, state that the effect of a tripartite agreement 'is primarily to bring forward recruitment which could in any case have been undertaken through normal growth of the economy'.16 In the same manner, the Central Organisation of Trade Unions emphasised that 'earlier experiences during 1964 and 1970 are not encouraging'.17 Given that tripartite agreements are only palliatives, why have they been proposed? There is circumstantial evidence to suggest that they have a high political currency and can be some sort of political safety valve. Thus, I tend to argue that they are not even intended to provide a solution to the economic problem associated with high levels of unemployment After independence in December 1963 popular expectations regarding economic benefits to be derived from uhttru were high, while the economy was in a slump, owing mainly to the foreign investors uncertainty about the intentions of the new African government, and the 1964 Tripartite Agreement was used to help bridge the gap between expectations and the economy's capability to fulfil them.18 It is tempting to argue that the 1970 Tripartite
14. C T. dark and L. L. Schkade, Statistical Analysis for Administrative Decisions (Cincinnati: South-Western Publishing, 1974), p. 125. The subjective approach to probability was brought to the attention of statisticians by L. J. Savage in his Foundations of Statistics (J. Wiley, 1954). 15. Mukui, Price Controls in Kenya, pp. 34 and 61. 16. Kenya, Ministry of Labour, Report of the Unemployment Relief (Nairobi, 1979), p. 16. 17. Central Organisation of Trade Unions, 'Development and Employment Creation in Kenya' (Nairobi, 1979), p. 2. 18. Sandbrook, Proletarians and African Capitalism, p. 166.

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Agreement came on the heels of the 1969 political upheavals, but it is likely also that it had an economic motive as well, coming as it did at a turning point in Kenya's economic history.19 In that period, Government's concern over the employment problem is indicated by its appointment in 1970 of a Parliamentary Select Committee on unemployment to gather views on possible solutions, and its request to the International Labour Office for a team of experts to study the question in 1972. Yet this concern clearly had political considerations, given the supposed base of opposition support. The 1979 Tripartite Agreement came in the transition period after Kenyatta's death to give people confidence in the new establishment.20 This short note argues that the effect of the 1979 Tripartite Agreement on wages, employment, rural-urban migration, industrial relations, and political costs contributed more to raising expectations than to realising them. All the tripartite agreements encouraged rural-urban migration and led to an unrecoverable decline in wages while not having much effect on the longrun trend in employment growth. The shortrun expansion in the wage bill would also have put a strain both on the government budget, since the Government is a major employer, and also on the private sector especially, because 1979 was a slack period of economic activity, with import controls reducing the supply of imported capital and raw materials and the credit squeeze reducing domestic demand for goods.
19. The 1969 political upheavals include the assassination of Tom Mboya on 5 July 1969, the banning of the opposition party, the Kenya People's Union (KPU), and the detention among others of the former vice-president Oginga Odinga. 20. In response to an earlier version of this article, Livingstone writes that 'Mukui cxpress[es] doubts whether the Agreements benefit workers in the way in which they bestow economic benefits to employers and political benefits to the Government... The latter benefit might explain adherence to the policy in the face of the widespread doubts that have been expressed before now regarding its effectiveness in creating employment'. See Ian Livingstone, Rural Development, Employment and Incomes in Kenya (Addis Ababa, 1981), pp. 9, 17.

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