• Many people work in the informal sector 'out of necessity, not choice'
Image: JACK OWUOR
Personal satisfaction, uncertainty about the future, avoiding registration and taxation are some of the reasons people shift from the formal to the informal sector.
Radio Africa Group HR business partner Linda Saina said some people choose to move because they are unsure of their future at their workplace.
"If a person is not really sure about the longevity of their job, they may choose to go off into the informal sector, instead of staying unsure," she said.
According to the World Bank, however, many people work in the informal sector out of necessity, not choice.
Monami Dasgupta, a research analyst at IFMR Finance Foundation, said there are two features of the informal sector that are well-recognised today.
"First, much of the informal economy contributes greatly to the formal economy," she said.
"Secondly, women constitute the majority of precarious, underpaid, informal workers."
A report by the United Nations' Economic Commission for Africa showed Kenya had the highest informal sector employment among nine countries in 2015.
"Employment in the sector stands at 77.9 per cent of the total, ahead of Rwanda's 73.4 per cent and Uganda's 59.2 per cent," read the report.
"In Kenya and Rwanda, three out of four workers are employed in the informal sector, a proportion that increases to over 80 per cent among women."
OFFICE JOBS TOO FEW
The study attributes the high level of informal sector workers to the inability of the formal sector to absorb the high number of job seekers.
A paper on 'Transitions between informal and formal employment' states private wage workers exhibit the shortest employment durations, of about four years.
On the other hand, government workers exhibit the longest employment duration of about 15 years.
"The self-employed also have much longer job durations than private wage workers, ranging from eight years (for those who do not have employees, or who only hire family members) to 10 years (for those who hire non-family members)," read the paper.
Further, transitions from private wage employment to casual work are more common among those with lower levels of education.
However, transitions to self-employment are more common among those who have been in their jobs for longer.
Saina warns that instability and market appeal for the product may be some of the challenges faced during the transition.
"The business will be unstable for a while before it picks up the pace, and sometimes, the product being sold fails to appeal to that specific market," she said.
However, if one is successful, they enjoy benefits such as dictating terms of their businesses, more money and personal branding.
"This also gives them the opportunity to be future employers and do what they enjoy," she said.