Kenya Among Countries Where Formal Jobs Remain a Coveted Luxury

Statistics from the recently released regional economic outlook for 2019 by the African Development Bank (AfDB) show that the vast majority of jobs created in Africa in the past three decades have been informal jobs.

According to the report, while data on informal employment are sketchy, it is clear that Africa has the highest rate of informality in the world, estimated at 72 percent of non-agricultural employment (formal jobs) and as high as 90 percent in some countries. Furthermore, there is no evidence that informality is declining in Africa.

It has been noted that informal employment tends to be countercyclical where economic downturns typically lead to a slowdown in economic activity and an increase in informality. Economies in a recession are likely to experience a shift from tradable to non-tradable sectors, where informality is higher.

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East Africa Outlook

The report paints a picture of what is experienced in Kenya. With unemployment rates reported to have reached 43 percent, it is clear that informal employment acts as a buffer during downturns for people who are laid off or looking for new jobs.

“The job-issue is linked closely to the quality of growth where the nature of development in most East African countries is not tailored to generate decent jobs hence the high level of informality,” said AfDB Lead Economist Mercellin Ndong-Ntah.

According to the report, the employment challenges exist in the wings of a strong economic growth era in East Africa, which stands at an average of 5.7 percent throughout 2018 marking the highest on the continent to elevate inclusive growth concerns.

Efforts to address poverty in East Africa are bearing no fruits due to severe inequality challenges illustrated by earnings where 48.4 percent of income goes to the 20 percent richest population.

See Also Kenya’s Unemployment Rate Hits 43.5 Percent

On the contrary, only 6 percent of the income goes to the poorest 20 percent amidst varied income gaps across the East African countries. The highest levels of inequalities have been reported in Djibouti, South Sudan, and Comoros.

The lowest was registered in Burundi, Tanzania, and Sudan.

Structural Transformation

The best option that could be leveraged to realize structural transformation is industrialization. There is a need to raise productivity and output primarily through the promotion of agro-based industries.

Kenya continues to face the challenges of inadequate infrastructure, high-income inequality, and high poverty exacerbated by high unemployment, which varies across locations and groups (such as young people).

Kenya is exposed to risks related to external shocks, climate change, and security. The population in extreme poverty where most people living on less than 200 shillings declined from 46 percent in 2006 to 36 percent in 2016.

Read 60% of Kenyans Use Informal Solutions to Deal with Financial Shocks

But the trajectory is inadequate to eradicate extreme poverty by 2030.

The lack of formal wage jobs is forcing youths to search for innovative employment in agriculture and informal household businesses.

“Because the informal economy will remain part important in the provision of jobs to the youth, policymakers must, therefore, raise its productivity, support it and eventually formalize it,” notes the report.

Measures Taken

The Kenyan government is focusing on manufacturing under its integrated economic transformation pillar with the aim of creating about 800,000 new jobs in addition to the modernization and development of new factories.

However, there are challenges facing the sector where statics and the current state of affairs show that the manufacturing industry remains depressed.

Cost of electricity, for one, has made the manufacturers’ products less competitive in the market and some of them are already exiting the Kenyan market.

Refer High Cost of Electricity in Kenya Forcing Industries to Relocate

Also, the GDP share of the manufacturing industry has, over the years dropped and in 2017, it stood at 8.4 percent from a 10 year high of 11.8 percent.

The sector’s contribution significantly dropped from 207 in 2016 to a slow growth that stood at 0.2 in 2017.

Meanwhile, the Kenya Association of Manufacturers (KAM) has expressed concerns regarding the decline in manufacturing activities in Kenya.

Nevertheless, the government remains hellbent on formulating the right policies that will rejuvenate the sector to include ease business registration and the implementation of lower power tariffs to lower cost of production.