Millions of Kenyan youths joined the ranks of the working poor in the past five years as employers turned to temporary or contractual jobs to cut costs – stalling the social progress that usually comes with employment.

Temporary employment, which comes without key benefits such as pension, health insurance or access to loan facilities, has left the majority of young people either underemployed or underpaid locking them up in the bottom quarter of the social pyramid, according to the Institute of Economic Affairs (IEA), a Nairobi-based think tank.

Kenya has had one the most flexible labour markets in Africa since the country embarked on economic liberalisation in the early 1990s. Market data, however, shows that deregulation deepened in the past five years resulting in a steep rise in the number of part-time, contract, and out-sourced workers with serious ramifications on the social front.

Official statistics show that casual employment grew by 13 per cent last year compared to a five per cent growth in 2007, reflecting increasing preference for casuals. Regular employment dipped 2.9 per cent during the same period.

This trend has seen the proportion of casual workers in the formal sector of the economy increase gradually from 17.9 per cent in 2000 to 32.2 per cent last year.

“Hiring casuals contrasts sharply with the country’s desire to reduce poverty and enhance social protection,” said Katindi Sivi, a programme officer at IEA.

Inuka Kenya Trust, a civil society organisation that co-authored the labour market report with IEA, says social stagnation in employment combined with the army of the unemployed have become the biggest threat to Kenya’s long term stability requiring immediate action.

“We are sitting on a time bomb as more youths continue to be out there without jobs while those who are employed earn peanuts with little personal advancement,” said John Githongo, the chief executive of Inuka Kenya Trust. “The danger is that unemployment or underemployment is extending the burden of dependency on parents, diminishing self-esteem fuelling frustrations and making crime an attractive option,” said Mr Githongo.

Besides, underemployed or poorly paid employees often become incapable of starting families, providing their children with good healthcare or educating their off-springs – stalling social progress in the long term.

IEA says Kenya’s dependency ratio has increased in the recent past as more young adults – many of them in poorly paying jobs – continue to rely on their parents for financial support.

Kenya’s rate of creating formal sector jobs has continued to trail the number of young people entering the labour market and analysts say that trend will continue even if economy grew at the rate of more than 10 per cent annually.

The cascading of large numbers of young people to low-paying informal sector jobs is seen as one reason why Kenya’s income disparity has been widening, a risk to social stability that is one of the key pillars of Vision 2030.

Census results released in September showed that 2.2 million Kenyans, the majority of them youths are unemployed and are actively seeking jobs in an economy where growth slowed down to 1.6 and 2.6 per cent in 2008 and 2009, respectively.

The economy generated only 445,000 jobs in 2009 less than the 2008 figure of 475,000 and 486,000 in 2007. Employers said the prevailing regulatory and business climate that is characterised by high cost of investment and bureaucracy has made permanent employment untenable, at least in the medium term.

“We recognise that youth unemployment is a crisis but employers are just responding to the realities of the labour market,” said Betty Maina, the chief executive at the Kenya Association of Manufacturers.

“Kenya’s new labour laws have raised labour costs by at least 20 per cent since coming into force two years ago, meaning employers have to look for ways of reducing the overheads,” she said. The regulations, which came into force last year to protect casual workers from exploitation, however, had the result of making the hiring of such employees expensive. Many employers responded to the regulations with deep lay-offs of temporary workers aiming to escape the extra cost. Hired on short-term contracts, most casual workers labour for long hours under poor working conditions and low wages, often without maternity, sick leave, housing and medical allowances.

More recently, employees have been denied the right to join trade unions and access to basic services like water while some are victims of reported sexual harassment at the workplace.

As Kenya’s economy recovers, the realisation of Vision 2030 will largely depend on how fast the economy creates jobs for its millions of unemployed youth.“Population growth of Kenya’s magnitude comes at a high cost to a developing country in terms of provision of services and demands higher economic growth manage or forces the government to stop providing some social programmes,” said Prof Joseph Kieyah, the head of private sector development division at Kenya Institute for Public Policy Research and Analysis.

The IEA’s findings also imply that youth unemployment and biting poverty are likely to escalate in the next five years.

Youth unemployment remains one of Kenya’s top policy headaches to which the government has responded with successive stop-gap measures such as revolving funds and the Kazi Kwa Vijana initiative to help stem a looming social upheaval.

These efforts have however come under intense criticism over the methods of execution and their overall impact on poverty.

The latest findings are expected to stoke the old debate as to whether the Vision 2030, which is grounded on a high economic growth - at 10 per cent - will have any impact on Kenya’s proverbial mountain of poverty that has left more than half of the population in the bottom income band.

“If we do not sort out the bulging youth problem now, it is highly likely we will not achieve Vision 2030 targets,” said Dr Collins Opiyo, the Director of Population and Social Statistics at the Kenya National Bureau of Statistics. “The level of dependency is rising as there is still the elderly to think about,” he said.

Revelations of how the youths are being sidelined in the job market come just days after the National Social and Economic Council (NESC) - a key State organ that is responsible for Kenya’s economic policy - warned the 10 per cent annual rate of economic growth is not enough to lift the estimated 60 per cent of the population from poverty – even if that level was sustained for the next two decades.

Kenya aims to grow her economy by at least 10 per cent annually by 2012, a medium-term target it hopes will create more jobs, raise household earnings and close the gap between the rich and the poor.

East Africa’s largest economy has come under increasing pressure to find a policy mix that will accelerate growth, stem rising cost of living, spur job creation and put more money in the pockets of households by supporting key sectors.

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