Feature: 90% of Kenya’s Job Growth Driven by Informal Sector, Exposing Economic Dualism

Kenya’s labor market experienced significant growth in 2024, with the creation of 782,300 new jobs. However, the latest 2025 Economic Survey from the Kenya National Bureau of Statistics (KNBS) reveals a striking trend: a staggering 90 percent of these new opportunities arose within the informal sector, underscoring a persistent economic divide in the nation.

[ays_block_subscribe id=’1′]

The data indicates that the informal economy generated 703,700 new jobs in 2024, slightly down from the 720,900 recorded in the previous year. In stark contrast, the formal sector saw a modest addition of 78,600 jobs, representing a 2.4 percent increase. This disparity highlights the continued reliance on informal employment as the primary avenue for job creation in Kenya. Overall, total employment, excluding small-scale agriculture, reached 20.8 million in 2024, up from 20 million in 2023.

Interestingly, the survey also pointed out a slight increase in self-employment and unpaid family work within the modern sector, rising from 172,400 in 2023 to 175,500 in 2024. This suggests a degree of fluidity between the formal and informal realms, with some individuals potentially seeking self-reliance within the structured economy.

Wages Rise Amidst Easing Inflation: A Silver Lining?

Despite the dominance of the informal sector, the economic survey offered some positive news regarding compensation and purchasing power. The total nominal wage bill saw a healthy 7.2 percent increase to Ksh2,998,800 million in 2024, with the private sector contributing the lion’s share at 70.6 percent. For those in formal employment, average annual earnings rose from Ksh832,700 in 2023 to Ksh881,400 in 2024.

This growth in wages coincided with a significant easing of inflationary pressures. The annual inflation rate, as measured by the Consumer Price Index (CPI), dropped to 4.5 percent in 2024 from a high of 7.9 percent in 2023. This decrease in inflation could translate to improved purchasing power for Kenyan workers and consumers, potentially offsetting some of the vulnerabilities associated with informal employment.

Sector Spotlight: Manufacturing Leads Private Sector Jobs

A closer look at the private sector reveals that manufacturing emerged as the leading employer, accounting for 15.9 percent of the total. Agriculture, forestry, and fishing followed closely at 14.1 percent, with wholesale and retail trade contributing 12.6 percent.

The hospitality industry also demonstrated a strong recovery, with employment in accommodation and food service activities growing by 6.1 percent to 102,900. Other sectors experiencing notable job growth included “other service activities” (4.8 percent), education (3.4 percent), and administrative support service activities (3.4 percent).

Public Sector Growth Slows, Education Remains Top Employer

Government employment saw an increase of 3.1 percent in 2024, a deceleration from the 5.9 percent growth in the previous year. Within the public sector, the utilities industry registered the highest growth rate at 6.9 percent.

Education continues to be the largest employer within the public sector, accounting for 45.2 percent of all government jobs. Public administration, defense, and compulsory social security collectively represent 34.4 percent. The Teachers Service Commission (TSC), the largest single public sector employer, recorded the highest growth rate at 5.2 percent in 2024.

Persistent Gender Gaps in Employment

The survey also highlighted the ongoing challenge of gender disparity in the workplace. While the number of female wage employees increased by 5 percent to 1,226,900 in 2024, their representation remains uneven across different sectors.

Notably, the human health and social work activities sector had the highest proportion of female employees, with over half of the total workforce in both 2023 and 2024 being women. Conversely, the mining and quarrying sector continued to have the lowest proportion of female employees, at just 13.2 percent and 14.2 percent in 2023 and 2024, respectively.

Looking Ahead

The 2025 Economic Survey paints a complex picture of Kenya’s employment landscape. While overall job creation and easing inflation offer a glimmer of hope, the overwhelming dominance of the informal sector underscores the structural challenges in fostering quality, formal employment opportunities.

The modest growth in the formal sector, despite wage increases, suggests that sustained efforts are needed to diversify the economy and create an environment conducive to formal job creation. Bridging the economic divide and transitioning a larger portion of the workforce into the formal sector will be crucial for long-term economic stability and inclusive growth in Kenya.

Source; Based on data from the 2025 Economic Survey released by the Kenya National Bureau of Statistics (KNBS).

[/ays_block_subscribe]