The right incentives can encourage public servants to rethink strikes

Post date: Thu, Jan 21, 2016
Category: General
By: Kwame Owino,

Public school teachers constitute close to 40 per cent of all public servants in Kenya. Their demanding a hearing from the Teachers Service Commission (TSC) on one hand and the Treasury and Ministry of Education on the other shows that they have superior organisation.

That the strength and organisation of the main teacher unions may present a significant risk to fiscal sustainability in Kenya is now a moot point.

It is obvious that both the national and county governments must find new solutions because constant negotiations in bad faith have brought this issue to the courts, with signals that the Executive and the Teachers Service Commission (TSC) will lose, and lose badly.

While I disagree with the bold claim that all teachers in Kenya merit higher pay because they can close down schools and also because legislators earn several times more, I respect that the courts seem to be bringing a conclusion to this dispute because neither the Teachers Service Commission nor the Ministry of Education has covered themselves in glory in the matter.

From my count, at least five different Cabinet Secretaries of Education have been in charge since the 1997 agreement that proposed an increase in wages paid to teachers. What this tells me is that no individual Cabinet Secretary has had sufficient incentive to solve this problem. Instead, their hope has been to negotiate a temporary relief to get teachers back to teaching and hope that the next strike call occurs after the cabinet secretary has moved on.

This problem is well understood under the public choice theory of economics, where bureaucrats or technocrats as we refer to them in Kenya, bear a greater incentive to use public office to serve their own interest.

Neither the Teachers Service Commission (TSC), nor the offices in the Executive branch of government pay any cost for regular strike calls. That burden is shifted to parents, whose children miss school or in the case of healthcare workers, the citizen who cannot afford private health services.

So what would a solution look like? I looked at a sensible claim suggesting that since independence, there have been 12 cases of industrial action by teachers in Kenya. On average that comes to a case of withdrawal of labour every fourth year, but the frequency in the last decade has been nearly twice as often.

This trend line shows that the frequency of strikes is increasing and it is also driven entirely by the demands of public schoolteachers for better pay. This makes the solution easy because it must of necessity involve an economic incentive.

Given that education has had a big claim on public resources since independence and Kenya is pushing forth with expanding access to high school education, the risk of strikes ought to be mitigated through some form of insurance scheme.

Since no conventional insurance corporation in Kenya appears to have either thought about or is brave enough to take this on, my suggestion is for the Treasury to build on the idea discussed by researchers at the Institute of Economic Affairs.

Legislators in Kenya understand the importance of education and the loss, both in time and resources that come from strikes. It is therefore in the interest of the executive and legislature to draw a short and concise bill that insures the country against losses that occur from strikes.

The legislators could dedicate a share that we estimate at 3 per cent of all spending on education to a fund that is transparently invested, with the prescription that this money will be added to the pension savings of teachers for every year for which no strike has occurred. What the law would provide is that teachers would accrue some of the funds to their retirement accounts for every year for which no strikes occur.

Thus for every strike that occurs, the individual teacher who does not got to class would lose the implied income from the insurance saving. Teachers would have a great incentive to avoid strikes unless the matter at hand were extremely grave and worth the penalty of losing that year’s gains.

In essence, government would create a market that penalises strikes and bad negotiation by the TSC and unions.

The leadership of the unions would invest instead in more pacific settlement of industrial disputes because any call to strike must be for a reason that justifies the implied “tax” that teachers pay for being away from class.

With incentives so aligned, teachers, the Executive, and the Teachers Service Commission (TSC) would have the incentive to negotiate an outcome that preserves industrial harmony through good market design.

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