Kenya’s labour market is growing but not in the right direction. According to the 2025 Economic Survey, total employment increased from 17.4 million in 2020 to 20.8 million in 2024.
On the surface, this may appear as progress. A deep dive into the data reveals a stark reality that over 83 per cent of Kenyans remain employed in the informal sector, a trend that has hardly shifted over the past five years.
The informal sector is often referred to as the heartbeat of grassroots enterprise. Indeed, it has long served as a buffer for millions seeking livelihoods in the absence of sufficient formal jobs.
But the dominance of informality, unregulated, low-paying and devoid of social protections is also a sign of systemic economic vulnerability. It reflects not just the ingenuity of Kenyans, but the failure of our systems to offer secure and meaningful employment.
In contrast, the modern or formal sector comprising wage employees and self-employed workers in registered businesses grew modestly from 2.9 million in 2020 to 3.4 million in 2024.
While this may be encouraging, this growth has not kept pace with population increases or labour market demands. The majority of young people entering the workforce continue to find themselves in informal and unstable jobs.
This structural imbalance has long-term implications. Informality undermines tax revenue, restricts access to credit and training and perpetuates working poverty.
It also hinders the enforcement of labour standards and expansion of social protection, both essential for a fair and resilient economy.
What Kenya needs is a deliberate, multi-sectoral strategy to address this imbalance. We must accelerate formalisation efforts by making it easier and more attractive for small businesses to register and comply with labour and tax regulations.
Technical and Vocational Education and Training must be aligned with actual industry needs to equip workers with relevant, market-driven skills.
Moreover, support for MSMEs which are considered as the engine of job creation, must go beyond token funding to include mentorship, innovation support and access to markets.
Employment growth should not only be about numbers; it should be about the quality and dignity of work.
To harness its demographic dividend and achieve inclusive growth, Kenya must focus on transforming its labour market, not just expanding employment.
As the country moves forward, tackling informality and strengthening the formal sector must remain a top priority in Kenya’s labour market policy agenda.
Until we do, the promise of decent work for all will just remain a promise.
The writer is Federation of Kenya Employers Executive Director and CEO
