Weak policies at the heart of Kenya’s Unemployment crisis

By Frankline Sunday

The year is 2002 and Kenya is smack in the middle of an election year in one of the most pivotal elections in its four-decade history. The entire opposition has come together in a grand coalition to oust the incumbent ruling party that reigned since indepedence.

As part of its promises to change the status quo, the National Rainbow Coalition (NARC) has pledged to create half a million jobs annually over the next five years.

For a country that lists unemployment as its greatest concern, this is music to the electorate’s ears and several months into electing new leaders into office Kenya is declared the most optimistic country in the world.

Fast forward to 11 years later and instead of creating 500,000 jobs, the country only absorbs 50,000 annually of the 800,000 job seekers, into its labour market. Not only is the number of jobs created a paltry 10th of the opportunities promised and a 16th of those needed, but the overall unemployment rate has increased fourfold over the last twelve years.

Labour economists today warn that the unemployment rate will continue to increase despite numerous promises of jobs made by candidates seeking electoral office. “What we have had over the last 40 years is a policy framework based on growth-led employment which generally assumes that job creation comes as a byproduct of economic growth,” says Dr Jacob Omolo, a labour economist at Kenyatta University.

This has, however, not worked for the country, which has had a jobless growth over the decades. Kenya has had an average of 4.8 per cent growth in GDP over the last four years. Unemployment on the other hand has risen progressively from 6.7 per cent in 1978 to 40 per cent being experienced today.

The rate of job creation has not been flattering either. In 1988 the rate of job creation was at a high of 6 per cent, the highest it’s ever been, and by 2008 this number had wilted down to 1.8 per cent.

This has been worsened by the fact that Kenya has over the last ten years seen an unprecedented increase in the level of enrolment in both primary and tertiary education following radical reforms in the education sector.

This has led to the highest number of the educated unemployed than has ever been recorded in the country’s history.

According to the World Bank, high unemployment causes disillusionment and fuels social strife. Several solutions that have been put forward by policy makers to reduce the rate of unemployment have missed the mark for various reasons forcing a paradigm shift in the fight against unemployment.

GDP v/s Employment

“The only way we can achieve substantive job-creation based on the growth of our GDP is if we had a growth rate of 7.5 per cent per annum sustained over a period of not less than 15 years,” says Dr Omolo.

This is near impossible in the current economic setup given the fact that in the last 40 years, Kenya’s GDP growth has been less than 4.1 per cent in more than half of this period. The country has achieved a growth of above 9 per cent in only four of the years in this period.

Since the economic growth has been wavering over the years, it is very hard to post significant changes in the unemployment levels hence the country’s situation of a jobless economic growth.

“Our employment elasticity has also been low and between 2002 and 2007 we attempted to promote economic growth and had relatively good employment growth and our elasticity was at 0.43,” explains Dr Omolo.

Employment elasticity basically means the rate at which economic growth creates job opportunities and the preferred employment elasticity for developing countries like Kenya which aspire to achieve a middle income status is 0.7.

“Because we cannot sustain this economic growth and we cannot increase our elasticity, a big percentage of the jobs we create are not sustainable or are in the informal sector,” says Dr Omolo.

Informal sector, more jobs

Indeed while new job opportunities in the formal sector continue to be elusive for the country’s job seekers, Kenya’s informal sector has had a more favourable performance.

A study commissioned by the institute of Economic Affairs, IEA dubbed Youth Unemployment in Kenya, found out that over time, the rate of growth in Kenya’s formal sector employment has been low averaging 2.23 percent per annum compared to 17.22 percent per annum for the informal sector.

This has led to the Kenyan job market becoming increasingly informal, moving from less than a quarter of total jobs in the country in 1986 to slightly more than four-fifths of total employment in 2008.

Dr Omolo, who conducted the study states that the trends in formal and informal sector employment indicate that the job creation interventions implemented by the Government facilitated growth in informal sector employment more than it did to formal sector jobs, a situation that has several disadvantages.

“Jobs in the informal sector are precarious in nature because they have low levels of pay and low levels of productivity,” he says. “In addition to this, workers in the informal sector face risky health and safety conditions have poor representation and low job security.”

This creates a situation where workers get trapped into a lifetime of weak attachment to the labour market alternating between low paid insecure work and open unemployment leading to increased poverty and inequality.

Kazi Kwa Vijana, an example of policy failure

“Any employment framework should be anchored towards productivity promotion,” explains Dr Omolo. “It is through productivity that we can ensure value addition, growth in enterprises and ensure competitiveness in enterprises to realise sustainable job creation.” Failure in creating employment policies grounded on productivity promotion can best be illustrated through the botched Kazi Kwa Vijana initiative.

The Kazi Kwa Vijana initiative was meant to provide quick job opportunities to low skilled young people who were then paid wages at the end of the day.While the project saw many young people earn some money from work like tree planting, rehabilitation of irrigation projects in rural areas and sanitation work in urban areas, the effects were short lived.Since the labour bill was footed by the Government, the wages paid to workers under the Kazi Kwa Vijana initiative were above market prices leading to an overprice in labour costs.