The youth key to Kenya’s future growth plans

The contraction of Kenyan economy as evidenced by quarterly data is worrisome. Economic growth decelerated to 5.8 per cent in the first quarter of 2014 compared with 7.2 per cent in the same quarter last year.

Such contraction, however, is a manifestation of several factors including overzealous legislative and judiciary oversight that has delayed the presidency from rolling out its transformative agenda.

The contraction threatens the Kenyan dream that stitches us together as embodied in Vision 2030.

Kenya’s future economic growth and its sustainability lie primarily in educating and training its youth and matching them to appropriate jobs.

Given the steady rising youth unemployment, the educational system and employers have not adequately fulfilled the aforementioned policy obligation.

This is even more important because the youths account for 80 per cent of the population, and their unemployment is likely to get worse if the contraction of the economy continues.

The conventional policy recipe for a contracting economy is increased government spending to stimulate economic growth.

The Jubilee government is alive to this recommendation and has included the youth agenda in the strategy of jump-starting the economy as evidenced by its ambitious initiative to reform the National Youth Serve (NYS).

Purportedly, the rebranded NYS aims to transform the youth through training and economic empowerment.

The framework for reforming the NYS rests on a programme restructuring pillar. This pillar encompasses, paramilitary training and service regimentation, the national service and youth re-socialisation, social transformation and vocational training and enterprise.

The economic justification of this government intervention is premised on the market failure of the education and private sectors to manage the school-work transition for most of the youth.

The education system continuously has failed to produce graduates with the requisite skills that match the interests of the private sector.

Furthermore, the proposed NYS training has some element of merit that is good in the sense that its value may be greater for society than the individual, and therefore optimal investment in it requires government involvement.

The proposed NYS reform is likely to have short and long term economic impacts on the aggregate demand and supply, respectively.

In the short run, the government’s direct injection of Sh22 billion to execute the proposed reforms as well as other government spending will likely stimulate economic growth.

While such an expansionary policy carries the risk of inflationary pressures, its benefits of halting the economy from further contraction outweigh such risks.

In the long run, training constitutes a form of human capital investment, which yields a rate of return through increased productivity.

As per the proposed framework, the NYS recruits will undergo technical and vocational training, among others. Such training will equip them with technical skills in engineering, agribusiness, construction, hospitality, fashion, information technology and public duty.

Acquisition of these skills, which have been undersupplied, will increase the NYS graduates’ productivity and shorten their transition period to labour market, including that of their mentees.

In conclusion, the NYS reforms are necessary and timely to correct the market failure attributable to inadequate youth training by the education and private sectors.

Information asymmetry in the labour market has led the education sector to provide training to the youth that mismatches the interests of private sector.

It is also a necessary intervention from macroeconomics perspective of rebooting the economy that has stagnated.

While it is too early to measure the economic impact of this policy intervention, it will definitely reduce youth unemployment.

Prof Kieyah is a principal policy analyst at KIPPRA. Views expressed are personal.