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Labour market in turmoil as virus cuts over 1.7m jobs

BUSINESS
By Macharia Kamau | May 3rd 2021
Traders convert their car boots to fresh farm products along Northern Bypass in Nairobi, June 4, 2020. [Elvis Ogina, Standard]

Since Kenya reported its first case of Covid-19 in March last year, it has been a year of decline for the job market.

The employers say they are worse off today, with the impact of the pandemic continuing to bite, making it difficult to create jobs or even support existing ones.

Federation of Kenya Employers (FKE) noted while the situation has gotten worse since March last year, businesses and employees have to grapple with the effects of Covid-19 without the State’s helping hand.

The government withdrew all the goodies, including tax reliefs that had been extended to Kenyans last December.

FKE Chief Executive Jacqueline Mugo notes that the job crisis did not start with Covid-19. She says local businesses were already going through a rough time in 2019, when a number of them had already put in place plans to restructure, including layoffs.

Covid-19 compounded the challenges that many were going through. “The job market is worse than it was one year ago. Jobs were being lost in 2019 as enterprises were for some reason in distress and there were concerns already. Covid-19 found us in a dicey situation,” she said.

“Because of the lockdown measures to stop the spread of the virus, businesses came to a close. If a business is not operating, you have to look at how to contain fixed costs such as payroll. Many companies had to reduce their workforce or change patterns of payment and how they work.”

FKE survey three months into the pandemic showed that 8.3 per cent of the formal sector jobs had been lost. This translates to about 173,000 jobs of the 2.4 million jobs in the formal economy.

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The formal economy accounts for about 25 per cent of the jobs in the country with the informal sector accounting for 75 per cent or about 16 million jobs. The Kenya National Bureau of Statistics in a later survey showed that formal and informal job sector losses stood at over 1.7 million.

There was recovery following the lifting of last year’s lockdown in July last year. But businesses may have gone back to where they were in the quarter between April and June 2020, following new restrictions put in place in March 2020. The restrictions were only relaxed yesterday.

“The 173,000 job losses in the formal sector might look small but when you consider that Kenya had been generating about 70,000 jobs per annum in the formal economy, it means that all the jobs created over the last few years had been wiped out,” she said, adding that the problem could be worse in the informal sector.

“If we are seeing the kind of huge disruption in the formal sector, you can imagine what is happening in the informal economy. It is the money generated in the formal economy that trickles down to the informal sector.”

Mugo says similar job losses may have played out when the State locked down five counties. President Uhuru Kenyatta however reopened the counties during the Labour Day Celebrations on Saturday.

Job Wanjohi, head of policy, research and advocacy at the Kenya Association of Manufacturers said most jobs in key sectors are far from recovering, with most firms focusing on the reduction of costs, retaining jobs and improving on cash flow.

He said most firms shed jobs, especially casual workers while trying to retain permanent staff, who would be critical in the recovery phase.

 

Covid 19 Time Series

 

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