Economy

Formal jobs growth fall to a seven-year low as salaries increase

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Treasury Secretary Ukur Yatani during the launch of the 2020 Economic Survey in Nairobi on April 28, 2020. PHOTO | EVANS HABIL | NMG

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Summary

  • In total, the Uhuru Kenyatta-led administration, which rode to power partly on a promise to create a million jobs every year, created 846,300 (both formal and informal) jobs last year, a slight improvement from 824,900 in 2018.
  • The KNBS data shows that only 78,400 new formal jobs were created in the economy last year, down from 80,800 in 2017.
  • This was the slowest pace of formal job growth since 2012 when the economy generated only 75,000 official jobs.

The number of formal jobs generated by the economy fell to a seven-year low in 2019, dimming the hopes of school and college leavers in a year when economic growth slowed down to 5.4 percent.

However, the decline was counterbalanced by the growth in informal jobs, which rose from 744,000 in 2018 to 767,900 last year, according to data released by the Kenya National Bureau of Statistics (KNBS) in Nairobi yesterday.

The rise in informal jobs highlights the growing importance of the Jua Kali sector as an employment creation machine in Kenya.

In total, the Uhuru Kenyatta-led administration, which rode to power partly on a promise to create a million jobs every year, created 846,300 (both formal and informal) jobs last year, a slight improvement from 824,900 in 2018.

The KNBS data shows that only 78,400 new formal jobs were created in the economy last year, down from 80,800 in 2017. This was the slowest pace of formal job growth since 2012 when the economy generated only 75,000 official jobs. Last year’s figures are also the lowest under the Jubilee administration, which came to power after the 2013 election.

Figures for this year will likely be hit by the effects of the coronavirus pandemic, which has led to a slowdown in the business environment and led the Treasury to forecast that economic growth could decline to 2.5 percent and possibly lower to 1.8 percent.

“It is affecting every segment, every sector of the economy... there is loss of jobs, loss of earnings, and there is general slackness of growth at all levels. This might actually persist for a long time,” Treasury Secretary Ukur Yatani said during a media briefing Tuesday.

The private sector generated 46,100 or 58.8 percent of the formal jobs. This was a reduction from the 57,600 jobs generated in 2018.

A general drop in the number of formal jobs is a major blow to jobseekers, especially the close to one million young people who graduate from various educational institutions every year. Already, more than four million of Kenya’s youth eligible for work have no jobs, according to the maiden quarterly labour data released by the KNBS last month. The report shows that 4,066,362 — or 34.27 percent of 11.8 million young Kenyans — were jobless as at December when the data was collected, highlighting income inequalities across age demographics.

Young people are the hardest hit by joblessness compared to their counterparts who are above 35 years in an economic setting that is plagued by a hiring freeze on the back of sluggish corporate earnings.

Kenya’s years of strong economic growth have created jobs, but they are mostly low-paying, informal and coming at a rate that economists say is too low to absorb the rapidly growing youth population.

According to KNBS, the average earning per employee increased by 8.1 percent from Sh59,993 per month in 2018 to Sh64,854 last year. This means the rise in workers’ take-home pay outperformed inflation for the second year in a row.

Average inflation stood at 5.2 percent last year, leaving workers with a stronger purchasing power last year.

"The real average earnings (inflation-adjusted pay) increased by 2.3 percent compared to a growth of 3.2 percent recorded last year," said KNBS.

In spite of improved real wages, pay disparities still persist between various sectors and genders. While an employee generally earns higher in private than public sector, activities such as supplying water, agriculture and household chores continued to attract low pay across the sectors when compared to banking and NGO jobs.

Workers in the financial sector on average earned Sh162,309 monthly compared to Sh30,786 in the dominant agriculture industry — which accounts for a third of Kenya’s gross domestic product (GDP).

Women employees also continued to trail their male counterparts in pay even in cases where they were represented by a common union.

According to the new data, the Kenyan economy grew by 5.4 percent in 2019, down from 6.3 percent the previous year, partly because of a slowdown in the agricultural, manufacturing and construction sectors. Agriculture grew by 3.6 percent in 2019, compared with six percent in 2018, after being hit by drought and then excess rains.

Manufacturing also declined, growing by 3.2 percent in 2019 against 4.3 percent the previous year. The construction sector grew by 6.4 percent, down from 6.9 percent in 2018.