Inside the ticking time bomb that is Kenya’s jobs crisis

Nearly three million Kenyans remain unemployed even as thousands of new graduates join the labour market every year.

The latest data released by the Kenya National Bureau of Statistics (KNBS) in April paints the picture of an economy plagued by a high unemployment rate that is growing at double the rate of the labour force.

By the end of last year, Kenya had a labour force of 19.39 million, underlining a growth of 1.5 per cent from the previous year. During the period, unemployment stood at 2.97 million, a three per cent increase from a year earlier. More than half of Kenyans without jobs, or 1.54 million people, were aged between 20 and 29.

Covid-19

Unemployment surged during the Covid-19 pandemic, which saw about 1.72 million workers laid off in three months to June 2020. KNBS, at the time, said the number of jobless people fell to 15.87 million between April and June compared to 17.59 million the previous quarter.

“Lockdowns and other Covid-19 related restrictions led to a spike in unemployment in 2020, with the largest increases among individuals below 35,” notes the World Bank in its Kenya Economic Update 2023.

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Using a strict definition, however, the rate of unemployment has been going down over the past two years. KNBS data, for instance, shows that the number of people who have no jobs at all reduced from 1.055 million in December 2021 to 960,001 in December 2022.

This was noted by the World Bank, which stated that the country’s unemployment rate has been on a downward trend since 2021 for all ages, bar those between 15 and 24, who, after an initial recovery, have experienced a gradual upwards trend.

It noted that time-related underemployment peaked in the last quarter of 2020 and declined thereafter, before rising sharply again during the first quarter of 2022 and going down the rest of the year.

Sluggish economy

Kenya’s economy has been growing sluggishly over the past decade, which means new jobs are not being created at a rate that is good enough to absorb the growing number of people joining the active labour force each year.

The country’s gross domestic product (GDP) grew by just 4.8 per cent in 2022; the eighth time in ten years that the economy grew by five per cent or less.

Read: How to effectively tackle Kenya’s growing unemployment rate

What should cause concern is that Kenya relies heavily on the agricultural sector to create jobs especially in rural areas, which means extreme weather events such as droughts and floods puts millions of livelihoods at risk. Agriculture contributes about a quarter of the GDP.

“The sector constitutes the largest share in the country’s exports, a significant share of foreign exchange earnings, employs about 8.5 million Kenyans, and accounts for 70 per cent of rural employment,” noted the International Monetary Fund (IMF) in a recent report.

Graduates increase

Further, as universities and colleges churn out more graduates each year, competition for scarce jobs is intense.

Data from the Ministry of Education shows that enrolment in both public and private universities rose from 568,653 in financial year (FY) 2020/21 to 620,480 in FY 2021/22, representing a nine per cent growth.

During the same period, enrolment in public technical and vocational education and training (Tvet) institutions in the sector rose from 217,017 in FY 2019/20 to 297,505 in FY 2021/22.

The ministry says lack of proper education especially in fields that have high demand for skilled labour force is one of the contributors to the country’s high unemployment rate.

Lucrative professions

But a major worry for thousands of graduates is that professions that were once considered lucrative and, therefore, a sure source of jobs such as medicine and engineering now no longer guarantee employment.

For instance, about 4,000 trained doctors are currently jobless despite chronic understaffing in public and private hospitals as the facilities strive to minimise their costs. Of these, 3,800 are medical officers, 272 are dentists and 1,280 are pharmacists.

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Another worry is that local graduates in professions such as engineering are being overlooked in the job market for foreign experts, with investors raising concerns about the mismatch of skills locally.

A December 2019 report by the Engineering Board of Kenya (EBK), for instance, showed that there were only 2,000 certified engineers in the country at the time against a demand of 20,000. This is despite local universities churning out about 2,500 engineers annually. This is made worse by the fact that Kenya is not investing enough in key sectors such as road construction, manufacturing, surveying and other hands-on sectors at a pace that is fast enough to absorb these graduates.

Finance Act, 2023

For employers, the government is creating an environment that is tough for businesses through increase in taxes.

Through the Finance Act, 2023, President William Ruto’s government has introduced a 1.5 per cent housing tax that will be deducted from all workers, with employers required to match the contribution.

This comes just five months after the State commenced implementation of the National Social Security Fund (NSSF) Act of 2013 in February. The Act increased salaried employees’ monthly deductions from Sh200 to Sh600 for the lowest earner and from Sh320 to Sh1,080 for top earners under a graduated scale.

Employers cut jobs

The unemployment crisis is showing no signs of easing anytime soon as employers shed jobs amid increasing taxation and a tough economic environment that has dampened consumption.

“We are seeing job losses because employers are under heavy distress,” said Federation of Kenya Employers (FKE) Chief Executive Jacqueline Mugo.

“This is, however, not happening on a massive scale because employers are adopting a wait-and-see attitude to see how the economy develops further before making further tough decisions,” she said, adding that most employers have stopped hiring especially for non-essential positions and are  resorting to employing workers on short-term contracts.

“Employers are looking for flexibility when it comes to hiring because the cost of employing staff on permanent and pensionable terms is high especially with the increased statutory deductions,” said Ms Mugo.

The Law Society of Kenya (LSK) has moved to court to challenge the Finance Act, 2023 arguing that the heavy tax burden will force employers to shed jobs, worsening the unemployment crisis.

In the suit filed under a certificate of urgency, LSK urged the Constitutional and Human Rights Court to stop government agencies and representatives, including KRA, from collecting the new taxes.

 “The result of massive job loss will be increased rates of crime as most of the unemployed youth population will be forced to resort to crime as a means of survival,” The LSK argues in its court papers.

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