Kenya’s Debt Now Stands At 70pc Of Country’s GDP, World Bank Reports

Kenya’s largest age cohort is between 10 and 14 and will be joining the labor force over the next decade. This inflection point coincides with the country’s effort to steer towards economic recovery from the COVID-19 crisis. Can the jobs and labor market keep up to deliver on this socio-economic dividend?

The latest Kenya Economic Update Edition 23: Rising Above the Waves, notes that with the working age (18-64) tapped to increase by 1 million per year, this young and growing population will significantly increase the labor supply while reducing the dependency ratio. If this increase in labor supply can be matched by a corresponding increase in good quality jobs, then average household and per capita incomes will increase. However, unlocking this first potential demographic dividend will depend on sufficiently increasing good economic opportunities, especially for youthful labor market entrants. Failure to do so could increase the risk of social unrest as large incoming youth cohorts are faced with limited opportunities.

“Kenya will need to boost both formal quality job creation and informal sector productivity to generate sufficient quality jobs if it is to accommodate the increased number of labor market entrants,” said Keith Hansen, World Bank Country Director for Kenya.

What are the key factors influencing the labor market?

Kenya’s economy is changing, with services becoming more central, but there is still considerable scope to accelerate transformation. The services sector contributed over half of all value-added in 2019 making it the largest contributor to the gross domestic product (GDP) and its growth, with the agriculture and industry sectors contributing smaller amounts. Yet, wide differences in labor productivity across sectors remain with industry as the most productive sector but accounting for only a small share of jobs. Most Kenyans work in agriculture or in low-productivity services jobs, where productivity has stagnated.

According to the report, labor supply in Kenya is abundant, but certain demographic groups are more vulnerable to inactivity. The labor force participation rate has increased significantly, by 6 percentage points between 2006 and 2019. However, Kenya’s female labor force participation rate, however, falls below that of some regional peers in East Africa.

Those with higher education had particularly high labor force participation (LFP) rates, while certain vulnerable groups are more often inactive. For example, there is marked increase in LFP among those who are better educated, with 92% of those with completed tertiary education participating in the labor force in 2015/16 compared to 79% of those who have completed secondary education. At the same time, LFP is much lower (a) among those living in the North and North Eastern Development Initiative (NEDI) counties, with just 53%of the working age population participating in 2015/1626; (b) among females (69% in 2015/16); and (c) among those with primary education (68%).

Job creation slowed down even prior to the COVID-19 crisis as employment diversified from agriculture in the decade to 2015/16 resulting in a larger proportion of service sector employment. As a result, while over half a million more people were employed (3%) in total between 2015/16 and 2019, employment transition to more productive sectors has stalled in the last five years.

Earnings depend strongly on educational attainment. The premium in earnings compared to having no formal education begins at 27% for individuals who have completed secondary education, 72% for those with completed college education and 158% for those with completed tertiary education. On this account, Kenya has made great strides in providing education, but both education and skills remain low among the current stock of workers.

Although access to education has increased among the younger cohorts, improving the quality of education remains important. Workers often lack basic skills such as reading or writing, and computer skills. A 2013-17 skills survey  found that most adults with secondary education are functionally illiterate in English. Also, among individuals with university education less than one quarter are functionally literate in English. Employers furthermore identify the inability to handle computers for work related tasks as one of the most significant skills gaps among white-collar workers. For those already working, training and retraining opportunities remain limited.

How can Kenya produce more productive jobs?

“To produce more quality jobs Kenya needs to continued investment in early childhood development, increased  primary healthcare coverage and quality of education that can provide fundamental skills to be productive and adaptive to changing skill demands to future entrants in the labor force,” said Ramya Sundaram, World Bank Senior Economist.

Current workers, especially youth and women, need multifaceted support, combining training to develop different skills, financing, and support in connecting to better opportunities, to increase their employment and earnings. As workers face multiple constraints in finding employment, there is a need for integrated interventions that address the multiple constraints they face to increase their productivity and find employment. These include interventions that tackle both the lack of skills of various dimensions (socioemotional, cognitive, technical, ICT42), on-the-job training and job search support for those seeking wage employment, and support to start businesses (including both financing, business training, behavioral facets, and connecting to markets).

To increase success in the school-to-work transition, technical skills, whether taught in general higher education or TVET, need to be more relevant; and strong private sector involvement is key. The education system needs to ensure it provides its graduates with the skills that employers are looking for. In higher education, curricula need to be adjusted to encompass task-based activities to prepare youth for work after graduation.