Education and The Informal Economy

Historically, education has been recognized as the main channel through which individuals secure access to wage employment and join the middle and elite classes in most countries. The World Bank has estimated that the average number of years in school for Kenyans is 6.5. This means that on average, most Kenyans do not possess the requisite level of skills and education for formal employment. Most people are therefore forced into informal employment as a means of scaling up the social mobility ladder.

A report on employers’ perceptions of graduates published by the Inter-University Council for East Africa (IUCEA) and the East African Business Council concluded that on average, 56% of students graduating from East African universities lacked basic and technical skills needed in the job market. There needs to be restructuring of the educational system to equip students with skills that are relevant to the formal job market. An option that would have to be considered is that of putting special emphasis on technical subjects. They should be developed to levels where they will be viewed in equally high esteem as traditional formal employment professions such as Law or Medicine. They offer a key platform for a much needed tailor-made skills acquisition suitable for a labor force that would feed into the growth of indigenous manufacturing industries.

The high rate of growth being experienced in the informal sector can be attributed to the high levels of unemployment amongst graduates. This limited access to formal employment causes most of them to venture into alternative forms of self-employment as a means to making ends meet. The drive to set up these businesses has greatly contributed to a rise in creativity and innovation driven enterprises that operate in an environment where one needs to remain competitive and dynamic so as to stay afloat. As a result, there has been a change in perception of the informal sector which was traditionally characterized by participants who had attained a basic level of education. There has been a gradual shift in its perception whereby it was fondly referred to as the ‘Jua Kali sector’, towards one which presents itself as the option for those locked out of formal employment opportunities.

The angle that clearly presents itself as far as the rapid growth of the informal economy is concerned is that of a focus on making the sector a formidable employer by raising the quality of its employment. This can be achieved by changing the societal stereotypes whereby students who pursue vocational training are seen to do so as a second option after failing to secure university admission. The role that tertiary institutions such as polytechnics play requires a keener rethinking as far as their significance to provision of a strategically skilled workforce for our budding industries in the informal economy. Seeing as according to the Society of International Development’s State of East Africa Report 2016 that only 6% of the Kenyan population is formally employed, a lot more needs to be done to appraise the quality of informal employment as a means to achieving equitable and sustainable development for our society as a whole.
Informal Economy Analyst


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