Why Job Scarcity Persists Despite Kenya’s Economic Growth

Kenya’s economy is forecast to grow between 4.9% and 5.2% in 2026, yet job scarcity remains a persistent challenge; why is this, and what does the solution look like?

Firstly, analysts project that the economy will expand by nearly 5% this year, buoyed by stronger agriculture, construction, and services sectors.

Secondly, Inflation has eased into the Central Bank’s target range of between 2.7% and 7.5%, estimated at 4.4% as of January.

This indicates economic stability that should typically translate to increased business investment and hiring. Paradoxically, trends in the labour market tell a different story.

According to the World Bank’s Economic Update 2025, Kenya’s share of formal employment in total jobs fell by 3% in the last 14 years, from 18.5% in 2010 to 15.5% in 2024, even as GDP grew steadily during the same period.

On the other hand, even as Kenya created approximately 848,100 new jobs in 2023 alone, the Kenya National Bureau of Statistics (KNBS) reports that about 85% were in the low-paying informal sector, suggesting continued job scarcity and low access to meaningful employment.

Today, job scarcity continues to affect millions of Kenyans, with youth employment towering at a staggering 67% according to the Federation of Kenyan Employers (FKE); the number is higher by World Bank account (over 70%).

Considering the youth (15 – 34 years) in Kenya comprise about 35% of the Kenyan population, these statistics show they face the highest unemployment rate of any demographic.

Reasons Behind the Great Disconnect

Legal and Regulatory Hurdles

The disconnect between economic growth and job creation can be traced to structural issues that hinder firms from scaling and hiring at a pace that matches growth.

According to the World Bank, “Kenya has the highest product market regulation (PMR) score among the available sample of high- and middle-income countries (2.92 compared to an average of 2.27 in middle-income countries and 0.88 for the top five performers), reflecting substantial barriers to market entry, distortions from public ownership, and limitations on trade and investment.”

PMR measures how easy or difficult it is to start, run, or expand a business in a country. Higher scores mean more restrictions; lower scores mean a freer, more competitive market.

This means that significant legal and regulatory hurdles continue to impede competition and growthacross multiple sectors, perpetuating job scarcity.

For instance, registering a new business in Kenya can be a lengthy, costly process that discourages new entrants. At the same time, high taxation, tariffs, and non-tariff barriers may increase costs for businesses that rely on raw materials or export goods.

Combined, these factors make it difficult not only for Kenya’s formal sector to expand but also for many businesses to expand and offer more employment opportunities.

Youth and Skills Mismatch

Research shows that high youth employment is also driven by a disconcerting skill gap.

A 2023 survey by the FKE found that many Kenyan youths lack the requisite skills required for the roles they were applying for, both in the soft and technical domains.

The survey, which involved key employers across sectors, cited effective communication (49.1%), critical thinking (41.7%) and computer proficiency (36%) among the deficient skills.

This mismatch makes it harder for young people to convert education into employment, particularly in emerging sectors linked to digital innovation or specialised services, areas that are often expected to absorb labour in a growing economy.

Need for a Proactive Strategy Against Job Scarcity

Despite positive economic indicators, addressing job scarcity requires an aggressive, proactive approach.

To begin with, Investment in education and skills development that match current and future industry needs is crucial.

This means aligning vocational training with market demand, expanding digital literacy programmes, and strengthening public‑private partnerships to help bridge the gap between skills supply and employer expectations.

Additionally, simplifying market entry rules and reducing barriers, more firms could expand, innovate, and hire, turning economic growth into real opportunities for young Kenyans.

Also Read: Kenya’s Economic Growth 2026 Signals Cautious Recovery – Business News