New jobs the next big headache as economy stutters

President Uhuru Kenyatta holding up the Jubilee coalition manifesto during its launch at Kasarani on February 3, 2012. With him is his Deputy William Ruto and cabinet appointees Mr. Najib Balala and Charity Ngilu. Photo/FILE 

By NEWS DESK newsdesk@ke.nationmedia.com
Posted  Friday, May 3   2013 

IN SUMMARY

• The 2012 Economic Survey is also expected to show consistency with past job creation trends, with the likelihood it created about 600,000 jobs in the informal sector.
• The report, Unemployment in Kenya: A situational Analysis indicates the working-age population is estimated at 19.9 million people. Of these, 14.6 million are economically active, meaning they should be working.
• According to the Kenya Institute for Public Policy Research and Analysis (Kippra), the youth in Nairobi are more likely to be unemployed compared to other regions except North Eastern.
• The report proposes helping entrepreneurs especially through enhancement of access to credit. Such help would be like the ongoing projects of the Youth Enterprise Development Fund and the Women Enterprise Fund.

President Kenyatta’s promise to create a million jobs per year is expected to be one of his hardest tasks as he settles down to implement his raft of campaign promises outlined in the Jubilee manifesto.

The 2012 Economic Survey expected to be released on Monday is likely to show minimum economic growth last year that may not provide a solid ground for the Jubilee regime to spring it up to a rate of between seven and 10 per cent expansion in its first two years as promised.

Experts were predicting that the economy may have grown by 4.9 per cent last year, 2.1 points less than the minimum benchmark that President Kenyatta’s government hopes to achieve.

In 2010, the economy grew by 4.4 per cent.

According to the Jubilee manifesto, President Kenyatta hopes to build an economic boom upon which the one million jobs will be born.

That job target is nearly double the 520,000 job created in 2010 mainly from the informal sector, which is known for hosting a working population that is largely living from hand to mouth.

The 2012 Economic Survey is also expected to show consistency with past job creation trends, with the likelihood it created about 600,000 jobs in the informal sector. Economic experts say the jobs created in the informal sector, mainly Jua Kali, may not propel the Jubilee promise of helping many youths majority of them fresh graduates from universities.

“Jobs likely to make a lot of sense to our newly educated youngsters from universities and colleges are likely to come from the formal sector,” said economist John Mutua of the Institute of Economic Affairs.

“Unfortunately, the statistics from past Economic Surveys show creation of new jobs in the sector (informal) has stalled,” he said.

Although the government is compiling data on new labour statistics in the country, it is estimated that about 13 million legible workers are out of employment though they are expected to be in gainful employment.

The number of the unemployed, mainly youth, could rise drastically when the new statistics from the Kenya Integrated Household Survey are unveiled in the coming months.

Even those considered to be in employment, government statistics show, their pay is so low it cannot enable them to make ends meet, resulting to them being referred to as the “working poor”.

According to the report of the National Economic and Social Council, millions of “working poor” are engaged in some activity but the earnings received are not adequate to put them above the poverty line.

The report, Unemployment in Kenya: A situational Analysis indicates the working-age population is estimated at 19.9 million people. Of these, 14.6 million are economically active, meaning they should be working.

Yet only 12.7 million were employed while 1.9 million were considered to be openly unemployed. Ordinarily, people aged between 15 and 64 are considered to be in the labour force bracket.

University of Nairobi Economics lecturer Samuel Nyandemo said the government was facing an uphill task to create jobs in the formal sector in the magnitude promised unless it resorted to heavy financial investment to create more wealth that can pave way to work opportunities.

“This is unlikely to be the case soon,” Dr Nyandemo said, adding “the new government is expected to be diverted into addressing issues of the huge domestic debt it is likely to face”.

Dr Nyandemo predicted that the Kenya Revenue Authority is unlikely to raise enough cash that can be ploughed back into investments. “Matters will be worsened by the huge wage bills that will be compounded by the salaries going to the newly created county government officials,” he said, an issue likely to deny the government money to create jobs for mainly youth.

In its manifesto, the Jubilee government targets an economic growth of between seven per cent and 10 per cent “in the first two years to create one million new jobs for our youth”.

The promise is specific on the youth perhaps because they are the worst hit by the unemployment problem.

Unemployment rates are worse in urban areas.

According to the Kenya Institute for Public Policy Research and Analysis (Kippra), the youth in Nairobi are more likely to be unemployed compared to other regions except North Eastern.

“A plausible explanation is that urban areas (including Nairobi) attract youth from other areas causing a strain on the available job openings,” the organisation said. 

It is estimated that nearly half or 45.5 per cent of those aged among 15-19 year olds do not have jobs.

Some 35.8 per cent of youth age 20-24 and 22.8 per cent aged 25-29 years are not working.

A total of 1.9 million people are openly unemployed whereas 2.7 million are underemployed.

The underemployed population constitutes those working at less than desired or normal working hours. This can be, for example, caused by strikes, lack of finance, lack of raw material and  breakdown of equipment.

Mr Mutua said the jua kali sector where the government appears to be putting focus is unlikely to be a solution to the youth problem as “many of the informal sector jobs have low productivity and earnings”.

He said it would be difficult for the government to achieve set job creation targets in the first or second years given that there were general delays in the formation of devolved governments.

“We are yet to have Cabinet secretaries starting their work, which is crucial to settling down the economy,” Mr Mutua said.

He said there was need to inspire confidence in foreign companies to set up base in Kenya so they can create jobs that would benefit fresh graduates.

The government would also help by continuing to invest in infrastructure like roads, which would mean creation of more jobs.

Going by the trends of economic growth witnessed in the first term of the Kibaki administration, Mr Mutua said, it is highly unlikely the Jubilee government will hit the seven per cent mark in about a year.

Former President Kibaki pulled the economy from a growth rate  of about two per cent in 2002 to seven per cent in 2007.

According to Kippra, high unemployment could aggravate current poverty levels and can lead to social challenges such as delinquency and psychological disorders.

In its report., Unemployment in Kenya: Proposed Interventions, the organisation warns that unemployment could hamper effective governance and undermine peace and stability.It attributes high rates of unemployment partly to the high fertility rates experienced by Kenya in the 1970s and 1980s, “which contributed to the faster increase of the working-age population”.

Other reasons for the high rates of unemployment include lack of skills or skills mismatch; lack of start-up capital; seasonal variations; and wage rigidities.

The report proposes helping entrepreneurs especially through enhancement of access to credit. Such help would be like the ongoing projects of the Youth Enterprise Development Fund and the Women Enterprise Fund.

But it warns that such programmes must address key implementation challenges, including the weak governance of the funds and the “reportedly” rising default rates. It suggests that beneficiaries be trained in basic credit management and entrepreneurship.

The report says creation of jobs for the current labour force and absorption of new entrants, would require the government to accelerate high rates of economic growth.

This can be achieved by reducing costs of doing business and keeping political and macro economic risks low.

Simplifying registration processes, improving governance, improving physical infrastructure, and curtailing crime should be a top priority for the government.

According to the Institute of Economic Affairs, informal sector jobs are precarious in nature as characterised by job insecurity, poor wages, lack of social protection, weak safety and health standards and low job tenure
.