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New report warns of jobs time bomb

BUSINESS
By Macharia Kamau | June 30th 2021

Emmanuel Akenya, a Kenyan youth working with China Road and Bridges, tightens railings that will form Wangige underpass pillars in Kiambu County. [Denish Ochieng, Standard]

About 10 million people will join the labour force in Kenya over the next decade.

This will present a major challenge for a country whose industries have been struggling to create jobs even before the pre-coronavirus pandemic era.

A new World Bank reports notes that over the next ten year period, between 2020 and 2029, over a million young people will join the labour force every year.

This is even as Kenya struggles to create more jobs, with many sectors having shed jobs between 2015 and 2019.

This challenge has been aggravated by Covid-19, where companies across the different industries suffered a major decline last year forcing them to laid-off employees, with many of the jobs yet to be restored.

While the bulk of Kenya’s young and growing population presents an opportunity that the World Bank refers to as a ‘demographic dividend’, but this can only be realised ‘if jobs creation can keep up’.

“Between 2020 and 2029, the working-age population (18-64) will increase by one million individuals annually," said the World Bank in its latest Kenya Economic Update report.

"The demographic transition occurring as this “youth bulge” cohort attains working age will result in a decline in the dependency ratio (the average number of non-working age people supported by a person of working age), while labour supply will increase significantly.” 

Demographic dividend

According to the 2019 Census report by the Kenya National Bureau of Statistics (KNBS), Kenya had a population of 47.6 million, with an annual population growth rate of 2.2 per cent. About 39 per cent of the population is younger than 15 years of age and four per cent of the population is over 65.

Peter Mbondo, a porter at Muthurwa market in Nairobi, offloads sacks of sweet potatoes from a lorry on July 15, 2021. [Denish Ochieng, Standard]

“The largest age cohort is between 10 and 14 and will be joining the labour force over the next decade,” said the World Bank report.

“If this increase in labour 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 labour market entrants.

"Failure to do so could increase the risk of social unrest as large incoming youth cohorts are faced with limited opportunities. Kenya’s job creation rate will need to increase to reap the potential benefits from its demographic transition,” the report said.

Also, the World Bank expressed doubt as to whether the Kenyan economy will be able to cope with the demand for jobs as young people join the labour market in large numbers.

It noted that many sectors were unable to sustain jobs between 2016 and 2019, with mining having shed jobs by the biggest margin of 36 per cent.

Other sectors that posted huge job losses over the period include ICT (16 per cent), accommodation (15 per cent), utilities and construction (10 per cent) and manufacturing (three per cent).

This was even before Covid-19 struck and made the situation worse.

The few sectors that grew the number of people they employ include agriculture (five per cent), finance and real estate (130 per cent) and education, health and social service (26 per cent).

Service sector jobs

“Kenya’s economy is not currently on track to produce a sufficient number of jobs to benefit from its demographic dividend since workers entering the labour force are likely to enter low-productivity agriculture or service sector jobs,” said the World Bank.

“To achieve a demographic dividend, the economy needs to produce more quality jobs by accelerating economic transformation. The Covid-19 pandemic has added to this challenge by disrupting economic activity and causing job losses.”

Men ferrying goods in the city using handcarts. [Stafford Ondego, Standard]

The Federation of Kenya Employers (FKE) recently estimated that in the early days following the outbreak of Covid-19 in the country, more than five million jobs were lost.

Micro enterprises, which employ the majority of Kenyans at about 15 million, are estimated to have shed 5.1 million jobs.

These very small businesses seen across the country and sometimes employing few people, many times even one.

The formal sector, which creates the high-value jobs that could enable Kenya to reap the demographic dividend and employing about 2.4 million people, lost 173 000 jobs over the first few months after March 2020.

The number of formal jobs that were shed in the brief period is equivalent to those that had been created in the previous three years, with the economy creating 70 000 such jobs annually.

Some of the jobs have been recovered as the economy reopened and demand for goods and services slowly started growing.

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