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Discuss the Reasons Behind High Informal Sector Employment in Kenya


Date Posted: 5/9/2018 2:20:16 AM

Posted By: chammy  Membership Level: Silver  Total Points: 379

Discuss the Reasons Behind High Informal Sector Employment in Kenya

Labour intensive.

Most of work in the informal sector is manually done and hence the sector absorb majority people instead of doing such being done by the machine and this contribute to increased employment as may be as it would be compared to the formal sector where there is use machine to do operations so as to employee few workers.

Little capital is needed

Many business operating in informal require less amount of money for one to start thereby creating more chances and attracting more people to venture into the sector as a place to secure employment which could otherwise not have been available in formal sector due to high capital requirement e.g. for one to have a company registered and be able to fully conduct is operations, much finance will be necessary compared to a hawker in street in informal sector who will require small capital to start.

Poor Education system

Most of the people completing their studies from various institution are finding harder to venture in the formal sector due to education system failing to match with the job requirement in the formal market translating to the individual to be only be accommodate in the informal and secure employment here easily as would not be possible in formal.

Legal requirement and Taxation

According to the Kenyan Law, each business should be registered. Majority of the enterprise in the informal sector are not registered by the government making it easy to start and run a business as if the business is not registered it will not contribute in paying taxes enjoying the whole profit and will attract more people to come in in the informal sector since little is required and there is no paying f taxes since majority of the people are not willing

to tax to the government .In the formal there taxation hence little laborers as compared in the informal economy.

High level poverty

Kenya is a developing country with most of the families struggling to sustain themselves and provide for them basic necessity and due to being a developing, the informal economy tend to be the best solution as there is readily available cheap labor as most of this people do not have the relevant education and skill for them to go to Formal but can only suite in the informal sector.

Flexibility of the business.

Most trading activities under informal sector are flexible depending on the prevailing conditions which can either be supportive or discouraging. Example Hawkers keeps on changing what they are in terms e.g. when there is rain will start to sell products that are usually in demand according to the weather and is a major driver of to them into the informal since there freedom which is not exhibited in the formal sector.

No monthly expenses

Individuals in the informal sector do not any cost mostly for running their business activity which is a great advantage to player of the sector. Such expenses include bills of water,electricity,telephone,maintenance costs of the machine and this is among the factor that has made the sector to have high number of employee and more job opportunities compared to the formal sector where there are these cost regardless the business has sold or not which might discourage some potential job seekers.

No need of Physical Location
Majority business under the informal economy do not require physical building or one to rent a room which is attractive to the jobless since land and housing are very expensive for a business to bear hence in the absent of such people will be likely to do their comfortable of which the sector is the informal.

No cost is usually incurred in the purchase of machine

Owners of business mostly in the informal sector enjoy the advantage of not incurring much especially since machines and equipment are not bought which would be an extra cost. This makes the sector to attract more individual as result of lack machine, the work is more and entrepreneurs will not incur much when they are will to start they business more get absorb in the sector to work there.

The sector uses local available resources

Operations done under the informal sector uses resources that are obtained from within hence more people can be easily absorb as there is no shortage of resource such that every one in the sector has something to do and can still accommodate even more hence the more people are still getting employed.

1. Women and Men in the Informal Economy (200) International Labor Organization.
2. Hart Keith (1973)”Informal Income-Modern African Studies”.

Next: Social, Political, Economic Implication of the Informal Sector
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