Effect of COVID-19 Pandemic on Labour Market Outcomes in Kenya

Abstract

Purpose: This paper investigated the effect of COVID-19 pandemic on the labour market outcomes in Kenya, using quarterly labour force survey data (2019 to 2021), 2019 census data and COVID-19 wave II of a novel high-frequency phone survey collected from May 30^th to June 6^th, 2020. The study also estimated the impact of COVID-19 pandemic on unemployment rate by using the quarterly Labour Force Survey data from 2019 to 2022.

Methodology: The study applied probit models because of the non-linearity of the variables. More specifically, the dependent variables are binary terms, hence maximum likelihood estimation techniques are the most appropriate.

Findings: The findings of the study reveal that COVID-19 was associated with a 25-percentage point’s increase in the unemployment rate in the country with certain counties witnessing the highest spikes in unemployment. Although there has been some recovery, the unemployment rate remains elevated compared to pre-pandemic levels, signifying ongoing labour market challenges. COVID-19 impact on the labour market varied significantly by sector. The education sector experienced a higher incidence of employment loss, while income losses were more pronounced in sectors such as mining, manufacturing, retail, transport, and construction. Particularly, women workers in the retail and transport sectors faced twice the likelihood of income loss compared to their male counterparts. The pandemic disproportionately affected low-income workers and casual labourers, accentuating income inequalities in the labour market. Casual workers, who often lack labour protections and benefits, were significantly impacted.

Unique Contribution to Theory, Practice and Policy: Considering these findings, the study provides several policy recommendations: Implementing targeted interventions and support programs in counties with the highest unemployment spikes. These interventions can include skill development programs to enhance workers' employability and tailored employment and income support strategies adapted to each county's unique economic circumstances. Prioritize the adoption of Information and Communication Technology (ICT) to enhance resilience and adaptability across sectors. Governments, both at the national and county levels, should prioritize policies aimed at enhancing the incomes of disadvantaged households. Through expanding access to social protection programs, enforcing minimum wage regulations, and improving working conditions, especially for casual workers and low-income households. The study's insights provide valuable guidance for shaping future economic recovery strategies, particularly in the event of economic shocks in the labour market.