Justus Ondari
13 November 2007
Nairobi — Over 50 per cent of Kenyans working in the formal and informal sectors live in poverty, states a United Nations Development Programme study.
Based on labour incomes, contrary to popular belief, unemployment is not the most serious problem facing Kenyans in the labour market but low pay, said one of the study's authors, Prof Robert Pollin of the University of Massachusdetts-Amherst.
The study, An Employment-Targeted Economic Program for Kenya, says 4.3 million Kenyans or 36 per cent of the total labour force, work in the informal sector, while 1.7 million others (14 per cent) are in the formal sector.
However, due to lack of income records, the study does not include the 6 million Kenyans (50 per cent of total labour force), who are self-employed in the agricultural sector.
It says that out of the 13.5 million participating in the labour force in some way, 12.1 million are counted as employed and 1.4 million are 'openly' unemployed. The open unemployment rate is 10.5 per cent.
Live in poverty
According to the report, 69.8 per cent of Kenyans working up to 27 hours per week, live in poverty while 65.6 of those working for between 28 to 39 hours, also wallow in poverty. For those working over 40 hours per week, the figure declines to 46.1 per cent.
"Some of the people could be living better if they have other sources of income, say, from agriculture, are receiving remittances or have relatives bringing in some income," said Prof Pollin.
The report, a project of the International Poverty Centre (IPC) in Brasilia, UNDP , was launched yesterday at a Nairobi hotel. It was prepared by Prof Pollin and his two University of Massachusdetts-Amherst colleagues, Professors Mwangi wa Githinji and James Heintz.
It says a very high proportion of informal sector workers are either own-account workers or unpaid family members, generally earning less than average wage earnings in the sector, or nothing at all.
"The most desirable development path for Kenya would be through the expansion of decent employment opportunities in its formal economy," said Prof Mwangi.
To address the issue, the report proposes that the Government spend Sh50 billion per year on roads and water infrastructure beyond its current commitments.
Past decade
The additional funding will raise productivity and create 350,000 formal sector jobs. This will reverse the trend in which, over the past decade, employment growth in Kenya's formal sector has been weaker than in the informal sector.
It calls for alliances between commercial banks and microfinance institutions, in which the Government could subsidise any loans by banks to MFIs by up to 75 per cent of the principal, the report says. This will expand access to affordable credit.
It also proposes a relaxation of the 5 per cent inflation target, warning that the low targets are achieved through high interest rates that inhibit growth.
It also adds that the Kenya shilling is overvalued.
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