ECONOMIC UPDATE

Productive jobs key to Kenya’s Covid-19 economic recovery –WB

The projection however hangs in balance taking into consideration Kenya's high unemployment levels

In Summary
  • According to the report, Kenya's working age is tapped to increase by 1 million per year significantly increasing the labor supply while reducing the dependency ratio.

  • The number of the employed shrunk to 15.9 million Kenyans in September 2020 from a higher 17.8 million Kenyans in March.
People in search of jobs.
UNEMPLOYMENT People in search of jobs.
Image: REUTERS

Kenya's resilient recovery from the Covid-19 pandemic highly depends on increased labour supply to the job market, says a new World Bank report. 

It notes that Kenya's working age (18-64) is set to increase by 1 million annually, significantly increasing the labor supply while reducing the dependency ratio.

The report points out that 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.

It however notes that 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,” the report notes.

The projection however hangs in balance taking into consideration Kenya's high unemployment levels.

According to the latest quarterly labour report by the Kenya National Bureau of Statistics (KNBS), the number of those employed (both in formal and informal sectors)  shrunk to 15.9 million Kenyans in September 2020 from a higher 17.8 million Kenyans in March that year.

According to the latest Private Sector Managers Index for June released by Stanbic Bank, while firms added to their workforce numbers, the rate of job creation slowed from the previous month, May.

The index noted that rising demand in Kenya's private sector encouraged firms to increase their workforce sizes in June however the pace of job creation slowed due to efforts by some companies to reduce wage bills.

“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.

The report notes that Kenya can reap a demographic dividend if the creation of higher productivity jobs can be accelerated but achieving this will be challenging and has been made more so by the pandemic.

Demographic dividend is the accelerated economic growth that may result from a decline in a country's birth and death rates and the subsequent change in the age structure of the population.

A demographic dividend can contribute to growth and incomes, but only if Kenya can make more progress to generate jobs and accelerate economic transformation

According to the report, Kenya's population is young and growing, but fertility has been declining and the size of youth cohorts joining the workforce every year is set to peak within a few years.

This creates the potential to soon begin benefiting from a demographic dividend due to workers supporting fewer dependents on average, increasing average incomes – if jobs can keep up.

The report says that 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.

It also adds that the country's 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,” the report says