Jobless growth: Has future arrived early?

It’s a question every Kenyan is asking; if the economy is growing at a healthy 6.3 per cent per annum why are we not feeling it? Why has it not translated into jobs? How can we have a jobless growth? Let's unbundle this paradox like a birthday gift.

In the last two decades Kenya has become a hotbed of innovation based on ICT. Greater use of technology means more productivity, doing more with less. That naturally reduces number of jobs, you need less workers. Banks have been shedding off workers after mobile banking and M-Pesa took over lots of jobs previously done by employees.

Bar coding reduces number of cashiers in supermarkets. In some outlets in the West, there are even no cashiers, you do the scanning yourself.

We can’t have the cake and eat it; we must embrace technology and fewer jobs in the short run. No sector can be inoculated against technology including legal services and teaching. The only way to create more jobs than those destroyed by technology is to invest in research and development (R&D).

The problem is we have invested too little in R&D. Yet we need to innovate and come up the next generation of jobs such as gene programmers and other jobs based on the fourth industrial revolution. Suppose we had our Facebook or Apple? Technology destroys jobs while creating new ones. And because of globalisation, it can destroy jobs or create jobs remotely. Ideas spawned in Silicon Valley eventually find their way up to the remotest villages.

Technology is now more available than in the past. It has even become addictive. In the same way that weed or alcohol destroys our youngsters so will social media destroy some.

Let’s get closer home. From 2019 Economic Survey, the star sectors in growth were transport including postal and courier activities, accommodation and food services, information and communication, telecommunications and electricity supply, all which had a growth rate of more than 10 per cent.

This shows a shift to the service sector. Is it possible that we just shifted jobs from one sector to another, more like moving money from your left to right hand?

Manufacturing grew by 4.2 per cent.

After a slump in our economic growth because of electioneering, the economy has recovered with less jobs. Could it be that employers used the opportunity to invest in technology and need less workers? Could they have over employed? Has the job freeze in the public sector stopped anything being done? What will the Government do with employees overtaken by technology, such as switchboard operators and messengers?

Embrace ideas

Jobless growth can also be explained by the rise of oligopoly or duopoly where a few firms dominate an industry. Think of brewing or cellular phones. Think of banking. Using economies of scale, such firms create fewer jobs than SMEs. They are also likely to be technology intensive and need fewer workers.

One characteristic of mature economies is dominance by a few firms in each sector. We are eager to embrace Western ideas but afraid of their consequences. Data from Kenya National Bureau of Statistics show that most jobs are created by the informal sector, which we think is unsophisticated and backward.

Lately we have tried to crawl back on this sector. Remember reducing the age of imported cars to give the formal manufacturers breathing space? Seen how we treat hawkers and other informal traders compared with foreign investors?

Jobless growth could also be driven by the slow death of labour unions. After years of confrontation, unions now seem tamed into total submission. The best evidence is no salary raises on Labour Day. The decline of unions’ power means employers can easily let off redundant workers or replace them with machines. The firms report better profits with fewer workers.

We may not be feeling the 6.3 per cent growth rate because it’s not high enough. The current population growth demands a much higher growth to be felt, something like 10 per cent.

The high level of inequality means only a few people are feeling the growth. Inequality means this growthdoes not trickle down to the vast majority. Data shows that agriculture, forestry and fishing contributed about 34.2 per cent to GDP. Such sectors are often not touched by growth directly but through middlemen. If you are a farmer, you understand what skimming of the cream is about.

Are there solutions to jobless growth?

Andy Stern and Ryan Johnson from The Richman Center for Business, Law and Public Policy at Columbia University offer some solution to joblessness. They prescribe the same old solutions; education, innovation and stimulus. Will competence-based curriculum create a new generation of job creators?

Remember how we ranted against the A-level system? We got 8-4-4 and we are not satisfied after 30 years. Yet 8-4-4 took Americans to the moon. The system of education does not matter; it is the content that matters. What kids learn and how relevant it is for the rest of their lives. A car can have any brand name, but it is the reliability that matters to the owner.

Innovation leads to new ideas and industries. M-Pesa is a great innovation. Think of the jobs created by the product. Yet, we rarely see innovation in some of the growth sectors mentioned in the Economic Survey 2019 like food and accommodation. Ugali will always be ugali. Sleep is sleep!

The scholars also suggest in a very libertarian way that we need to get the government out of the way to create jobs. Too much control can be counterproductive. Which licences are unnecessary? How many jobs are lost through bureaucracy? Which targeted government projects or programmes can stimulate the economy? Do you recall the 2009 economic stimulus programme? How successful was it?

The market will signal to people what they must do to get by, say Stern and Johnson. Noted where Tuk-tuks and boda-bodas wait for their passengers? Markets are more efficient when information is available. Information is plentiful in Kenya, but do we seek it? Do we analyse it because the information generators do not always have us in mind?

We need not fear technology. Creative destruction leads to new jobs. New ideas destroy old ones. The car did away with the horse carriage. The big question is whether we are creative enough to come up with the innovations. What will come after M-Pesa? After Google? After electric car? Can we over-invest in technology to speed change?

Finally, jobless growth is another sign that Kenya is becoming a developed country before we know. The future is arriving prematurely. Other signs include reduction in attention span, death losing its sting and news aging  fast.

- The writer teaches at the University of Nairobi