Relationship Between Youth Unemployment And Economic Growth In Kenya

ABSTRACT

Employment opportunities have been the most significant priority by the Kenyan Government, where various policies have been put in place to cater for it. Economic growth is reckoned to be essential since a positive growth rate will encourage inward investment and improve revenues, which can be spent on long-term public sector works. However, youth unemployment is a consistent problematic element in Kenya, affecting the economy to a large extent. The general objective of this study was to examine the relationship between youth unemployment and economic growth in Kenya. The specific objectives of the study were to investigate the causal relationship between youth unemployment and economic growth in Kenya and to analyze the effect of economic growth on youth unemployment in Kenya. The theories studied include the theory of surplus-value, Solow-swan model, Okun’s law, and Keynesian theory, which explain the aspects of unemployment and economic growth. Secondary data was collected and used to illustrate the relationship between the variables, while the methodology used was the Granger causality test and the OLS method. A unidirectional causal relationship existed linking the two variables, where the lags of economic growth granger cause youth unemployment, and the coefficient between the two variables was positive. Hence Okun’s law coefficient didn’t apply when it comes to youth unemployment as opposed to the overall unemployment. However, the coefficient was statistically significant, indicating that even though the economy grew, the youth unemployment levels didn’t decline in high variations. It is plausible since a substantial number of individuals who are counted to be unemployed and actively looking for a job are usually the last to be employed as new jobs typically go to the privileged or the well-connected few individuals. The study suggested the County and National Government, in collaboration with the vision 2030 board should come up with viable policies to curb unemployment and at the same time, invest in the informal sector to drastically scale down youth unemployment.