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Kenya: Weak labor market looms ahead of 2022 polls

Kenya is a lower-middle income country with well- organised industrial relations, but structural challenges are affecting the labour market. ... An increase in living cost has eroded incomes' purchasing power and projections on the progress of employment by middle-class has been sluggish reaching 20% in 2020.

By Steve Umidha

 

Kenya’s labor market is expected to shrink next year on account of the upcoming general elections – but a rebound could follow almost immediately depending on the polls’ outcome.

Projections by the Parliamentary Service Commission (PSC) on medium term alternatives for steady economic growth during the transition period for 2022/2023, show that employers in key industries such as manufacturing, will halt hiring as investors adopt ‘a wait and see’ attitude pending polls outcome.

PSC, while relying on figures from the Kenya National Bureau of Statistics (KNBS), believes that growth in the private sector will remain muted as a result, even though Government consumption will increase significantly in 2022 on election related spending and drought mitigation measures.

“Growth in private investment is likely to remain muted as investors adopt a wait and see attitude pending the outcome of the general elections. A tension filled election marred with pockets of violence could lead to investor flight,” reads in part the report which covered the months between January and October 2022.

Kenya’s unemployment rate, according to KNBS, had been increasing over the past five years with formal wage employment climbing from 2.68 million people in 2016 to 2.93 million workers in 2019 followed by a sharp decline to 2.74 million people seen in 2020 because of the pandemic.

Formal employment in the primary sector, according to KNBS declined from 13.1 percent to 12.3 percent during the same period as was the industry sector share of formal wage employment which also declined from 21.7 percent to 21.0 percent.

In fact, a recent study by the World Bank, Navigating the Pandemic, found that as a result of the pandemic, poverty levels in Kenyan households jumped by 4 percentage points, an equivalent of 2 million additional households that were impacted by Covid-19 leading to sharp decreases in incomes and employment.

The unemployment rate increased sharply last year, approximately doubling to 10.4 percent in the second quarter as measured by the Kenya National Bureau of Statistics (KNBS) 2020 Quarterly Labor Force Survey.

Since the pandemic hit, Kenya’s economy is estimated to have been hit hard by COVID-19, severely affecting incomes and jobs.

Until May this year when signs of recovery began to sprout, Kenya’s economy had been critically exposed through the dampening effects on domestic activity of the containment measures and behavioral responses.

A total of 604 firms in Kenya sent workers home due to the coronavirus fallout, according to Federation of Kenya Employers (FKE) which said that at least 33 jobs were lost in every modern sector company between March and August 2020.

During the year, industries accounting for the highest wage employment in the private sector were manufacturing at 15.8 percent, agriculture forestry and fishing at 15.1 percent and wholesale and retail at 13.5 percent.

But a different approach will be needed if Kenyans are to come back into the labor force to resume their hunt for work, according to PSC’s recommendations.

“As a result, any interventions expected to enhance economic performance should focus primarily on these key sectors. If adequately supported, the expected returns are high in terms of increased household employment and income which will boost consumer demand. If incomes are sustained at a reasonably high level over the medium to long term, then this could boost private investment and reduce poverty.”

Kenyan labor force, particularly young people, are disproportionately employed in restaurants, entertainment joints, and the tourism sector which were largely shut down in March last year when the pandemic hit and remained closed through the three-month dry spell and beyond when the country went into a lockdown.

The total employment increased from 15.6 million in 2016 to 17.5 million in 2020; of which the majority was in the informal sector. Informal employment accounts for approximately 83 percent of total employment; excluding small scale farming and pastoralist activities -KNBS

It is estimated that 60 percent of the informal employment is mainly in wholesale, retail trade, hotel & restaurants while 20 percent is manufacturing activities –KNBS

Many of the unemployed are youths aged 20-24 years, followed by those aged 25-29 years. As at the first quarter of 2021, long-term unemployed youths (those aged 20-34) were 555,484 out of a labor force of 8.78 million youths.

 

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