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.
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