Estimated reading time: 6 minutes
By Dr. Gilda Odera and Annepeace Alwala
For decades, Kenya and much of the developing world have grappled with unemployment as the most persistent challenge. Governments have pursued familiar policies—building industries, expanding markets, and easing the cost of doing business—while placing immense pressure on employers to absorb young people into productive work. According to Dr. Gilda Odera, these strategies have delivered some progress, but the structural crisis of unemployment remains unresolved.
The reason is clear. Traditional models of work, designed for an industrial age, can no longer absorb the millions of young people entering the labour force each year. Factories, offices and public service jobs cannot keep pace with population growth and technological change. As the global economy evolves, labour markets are being transformed by digital platforms, artificial intelligence and new service delivery models.
These emerging sectors offer opportunity, but only if we develop the right skills and reimagine how labour relations are governed. More importantly, the need for a new social contract that recognises the limits of the old system and builds pathways into the digital economy, is now more critical than ever.
The Demographic Crossroads
Africa stands at a decisive demographic moment. With an average age of 19, Sub-Saharan Africa is the youngest region in the world. By 2050, its population will have doubled. For Kenya, this surge of human capital represents both an extraordinary opportunity and a looming threat. If young people are equipped for productive work, the continent can unleash a demographic dividend that powers decades of growth. If they remain unemployed or underemployed, the dividend will become a burden that erodes stability and deepens inequality.
The scale of the challenge is already stark. In Kenya, 70 per cent of the workforce requires reskilling to meet the demands of modern industry. Across the region, employers face shortages in critical skills even as millions of educated young people remain idle. This paradox of abundant but underutilised talent reflects not just an employment challenge but a crisis of alignment between education, work and economic transformation.
Dialogue Breakdown, Policy Fragmentation
At the heart of this misalignment is the breakdown of social dialogue. For decades, structured consultation between government, employers and workers was the foundation of labour relations. Over time, this culture has weakened and the terrain is characterized by legal tussles, siloed policy development and adversarial tactics where cooperation is needed.
Social dialogue is critical as it will allow stakeholders to co-create solutions that match skills to industry demand, adapt regulation to new forms of work and anticipate the disruptions of technology before they harden into crises. Without it, we risk addressing unemployment through fragmented and ineffective measures that do not touch the core of the problem.
Furthermore, traditional work models cannot conclusively address the unemployment issue and neither will they deliver inclusive growth. Manufacturing jobs and public service roles cannot absorb the numbers of young people graduating each year.
Emerging models demand specialised yet accessible skills. Unlike past professions that required years of training, professionals can now master many digital-age roles from data services to AI support through focused, short-term programmes.
This shift creates space for innovation in labour relations. Rather than debating how to preserve outdated structures, the country should foster dialogue that helps workers transition into new sectors while safeguarding their protections, benefits, and fair conditions.
Lessons from Collaborative Economies
Germany, if we are to draw lessons, has built one of the most resilient labour markets in the world through a strong system of vocational training rooted in social dialogue. The German Dual Training System combines classroom education with on-the-job training in partnership with employers. Workers, government and industry bodies collaborate closely to ensure that skills are continuously aligned with market needs. This system has allowed Germany to maintain low youth unemployment rates even during times of global economic turbulence.
A similar model, championed by the Federation of Kenya Employers is already in place. The Dual Technical and Vocational Education and Training Programme links training directly to industry demand. By 2024, the programme had placed 338 trainees into real industry roles, with a target of 6,000 placements across the country. While still modest in scale, it demonstrates that structured collaboration between employers, government, and training institutions can deliver real results.
Employers are demonstrating how to harness the new economy. For example, Sama has partnered with the University of Nairobi to build a talent pool for artificial intelligence, positioning Kenya not only as a consumer of global technologies but also as a producer of the human capital that powers them. At the Africa Employers Summit, participants warned that artificial intelligence could displace up to half of existing roles. Sama’s approach shows the alternative—how the right skills pipeline can turn disruption into opportunity.
The platform economy offers another frontier. In Kenya, it already generates an estimated 64.5 billion shillings annually, or about 500 million dollars. With the right dialogue and policy frameworks, this sector can provide thousands of flexible work opportunities. Without dialogue, however, platform workers risk exclusion from labour protections and social safety nets, undermining the sustainability of this new economy.
Consequently, to position its workforce for the digital economy, Kenya requires a new social contract that reflects the realities of the digital age. This contract must rest on three pillars. The first is trust, rebuilt through structured dialogue among government, employers, and workers. The second emphasises shared responsibility, recognising that no single actor can deliver sustainable employment alone. The third promotes innovation in labour relations, ensuring that policies support emerging forms of work whether platform-based, technology-driven, or digitally mediated by both protecting workers and encouraging sectoral growth.
The skills demanded by the digital economy are within reach. With targeted, practical training, young people can quickly acquire the capabilities needed to thrive in new industries. The real challenge lies in creating institutions and pathways that connect them to opportunity.
Kenya will lead this transformation. Its entrepreneurs, universities, and employers are already building foundations for a dynamic digital economy. What remains is the political impetus to make dialogue the default mode of labour relations. Traditional work models cannot deliver inclusive growth in the twenty-first century. A new social contract, adapted to the digital age, can.
