What investments and policies are needed to create stable formal sector jobs? We are in an epoch of jobless GDP growth. The proportion of youth in formal employment is perilously low. Only about 1 in 10 jobs created in 2014 was in the formal sector. Nearly 1 in 2 young Kenyans are jobless.
The proportion of youth in formal employment is perilously low. Only about 1 in 10 jobs created in 2014 was in the formal sector. Nearly 1 in 2 young Kenyans are jobless. In 2011, 75% of adult Kenyans said they went without a cash income, “many times”, “several times” or “always” during the year. In response to this dismal record in job creation, our society expects youth to create jobs. In response to this dismal record in job creation, our society expects youth to create jobs.
What happened to jobs? According to the 2016 Country Economic Memorandum released early March, 72 percent of the increase in Kenya’s GDP came from services. In contrast, the share of agriculture and manufacturing to our GDP declined or stagnated in the same period.
The irony is that 7 in 10 Kenyans depend on agriculture for their livelihood; jobs, food and nutrition. And many of us believe that agriculture is the mainstay of our economy. Moreover, while the country has registered impressive headline GDP, our record in job creation and prosperity has been dismal and unflattering. Tens of millions of young Kenyans are jobless and the most Kenyans who are in employment are drowning in inflation, gasping for wind.
The headline GDP could be many things. But opportunity for young people and shared prosperity for all is not one of those things. According to data from Kenya’s Economic Survey 2015, the informal sector employed 11.8 million people in 2014 against 2.4 million in the modern or formal sector. This means that over 83 percent of Kenya’s working age population is employed in the informal sector, which is dominated by low wage and low productivity jobs in jua kali, petty trade, transportation and hospitality.
Out of 799,700 created in 2014, only 106,300 were in the formal sector. This high level of informal sector jobs says nothing about the entrepreneurial genius of the Kenyan people. It says everything about the inability of the formal sector to absorb the huge number of mostly young people entering the job market. This large number of informal sector workers is a most powerful indictment of an unbalanced and underperforming economy.
Informal sector jobs are, as we know, are characterized by meager and unpredictable incomes, poor working conditions, especially lack of basic entitlements like paid leave, health insurance and pension. The informal sector in many ways traps tens of millions of Kenyans in poverty. I am sure you can imagine how hard it is to feed, clothe and educate children when your income is miniscule and sporadic. It is hardly surprising that shared prosperity and poverty reduction have not been distinguishing characteristics of the Kenya rising narrative.
Kenya’s moment and future are defined by the convergence of a large youthful population and rapid urbanization. These twin forces also happen to coincide with the reality that Kenya’s agriculture has enormous but untapped potential. Master Card Foundation has recognized this potential and has committed about $300 million to leverage Africa’s youthful population and address the continent’s low agricultural productivity. Our own Kenya Commercial Bank will invest $493 million to build a new cadre of youthful entrepreneurs in sectors such as agriculture through its “2JIAJIRI” program.
However, harnessing Africa’s youthful population and its untapped agricultural potential to drive prosperity must be directed by evidence, not just kind-heartedness on the part of do-gooders. There is not a large reservoir of Kenyan youth itching to take up farming. A youth survey commissioned by the East African Institute of Aga Khan University reveals that Kenyan youth with primary level of education had the highest interest in farming, compared to youth with post–secondary education. Similarly, 41 percent more youth with primary education would go into entrepreneurship compared to youth with post-primary education. Only 1 in 5 youth with university education are in self-employment; engaged in agriculture or off-farm enterprises.
The bad news is that the proportion of youth with primary school as their highest level of education – the reservoir of eager farmers and entrepreneurs – is declining precipitously. Moreover, 63 percent of Kenyan youth feel the government must create employment, put more educated youth into well-paying jobs. A majority of educated youth yearns for formal sector jobs, not farming or entrepreneurship.
Kenya’s economic growth is unbalanced. This epoch of jobless growth is socially, economically and politically unsustainable. The hard work of structural transformation must begin urgently. The growing numbers of young and well-educated Kenyans deserve well-paying jobs in the formal economy.