Minimum Wage Raises Contribute to Rural-Urban Inequality in Kenya

The results of this study indicate that minimum wage changes can have a significant effect of inequality. Applying a uniform minimum wage in urban and rural areas would not only be impractical due to the diversity of employment sectors in the two areas, it would also increase inequality. Any adjustments to minimum wages must aim to achieve a balance between workers’ demand for higher wages and the unwanted effects on employment, income, formality, migration, and spending that higher wages can produce. Rather than increasing minimum wages, the Kenyan government should consider implementing other social protection measures that support low-income earners and poor households. Further research is needed to identify which social protection measures would be the most effective. The positive outcomes linked to lower minimum wages are due to reduced labor costs and increased employment under this scenario. Therefore, rural job creation schemes—such as providing incentives to establish industrial parks, particularly in agro-processing—could also improve earnings for people in rural areas and reduce rural-urban migration.