Kenya’s recent economic growth has yet to meaningfully improve livelihoods, with new findings showing that job quality and wages are lagging well behind headline expansion figures.
According to the Kenya Institute for Public Policy Research and Analysis (KIPPRA), the economy grew by 4.7 per cent in 2024, largely supported by agriculture and services. However, formal wage employment rose by just 2.4 per cent, adding fewer than 80,000 jobs over the year.
Speaking at the launch of the Kenya Economic Report 2025, National Treasury Cabinet Secretary John Mbadi noted that while the economy has shown resilience, the bigger challenge is ensuring growth produces decent, well-paying work, particularly for young people and vulnerable groups.
He stressed that economic success should be judged by the quality of employment created, warning that long-term prosperity depends on secure, productive and inclusive jobs rather than growth figures alone.
Inflation eased to 4.5 per cent in 2024 from 7.7 per cent a year earlier, while the Central Bank of Kenya reduced its benchmark rate from 13 per cent to 10.75 per cent by early 2025, lowering borrowing costs and supporting private sector activity. Even so, KIPPRA found that these gains did little to improve job quality.
Of the 782,300 jobs created last year, around 90 per cent were in the informal sector. Mbadi acknowledged that employment growth has not kept pace with the demands of a rapidly expanding and youthful population, nor has it delivered sufficient income security. He reiterated that a strong industrial base remains essential for generating high-quality jobs and sustaining long-term growth.
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More than 80 per cent of Kenya’s workforce is still engaged in informal employment, typically characterised by low productivity, unstable incomes and limited social protection. This widening gap between economic growth and job quality is becoming a growing concern for policymakers, investors and businesses.
KIPPRA executive director Eldah Onsomu observed that while jobs are being created, many do not support sustainable consumption, savings or tax revenue generation. The report cautions that entrenched informality could undermine Kenya’s long-term growth prospects.
Agriculture and services, the main drivers of recent expansion, are also the most labour-intensive yet least formalised sectors. Wholesale and retail trade alone accounts for nearly half of total employment, but more than 80 per cent of roles in the sector remain informal.
Manufacturing, traditionally viewed as the engine of formal job creation, continues to struggle. High electricity costs, illicit trade, regulatory pressures and rising input prices have limited its capacity to absorb labour. As a result, much of the employment linked to manufacturing growth occurs within small, informal enterprises rather than large, high-productivity firms.
Barriers such as limited access to affordable credit, compliance costs and weak market linkages prevent many businesses from scaling up and formalising their workforce. The report notes that firms are expanding cautiously, often relying on casual labour and informal contracts to manage costs and uncertainty.
For households, the consequences are already visible. Despite easing inflation, stagnant or falling real wages, particularly in agriculture, are constraining purchasing power. Weak income growth and job insecurity are dampening consumer demand, a key driver for sectors such as retail, housing, financial services and manufacturing.
The dominance of informal work is also narrowing the tax base, as informal workers and enterprises contribute far less in income tax and social security payments. This is placing additional pressure on public finances at a time when debt servicing costs continue to rise.
