According to the Kenya Economic Survey 2012, employment increased by 4.7% when compared to the previous year’s performance. Signs of a decrease in this are however showing with symptoms such as cost-cutting measures showing in various companies. The most recent of these are the layoffs that took place in Kenya Airways where over 500 employees lost their jobs. Kenya Power isn’t too far off with 1500 employees under review.
While it is true that cost-cutting measures help companies reduce their operating expenses and increase their profits, it also holds true that unemployment lingers not too far from its implementation. But what does that mean for our GDP?
On the face of it, unemployment means you’ll have to search for another job, as you strive to make due payments for rent, transport, food and all other variable costs one incurs. Hidden costs associated with it include;
- Tax – The less people there are earning in an economy, the less revenue the government receives as tax and the less there is available for distribution to different counties. Financial resources are compulsory for any nation to develop, more so for Kenya which is aiming to become a middle class economy by the year 2030. Kenya’s tax to GDP ratio is approximately 22.5%
- Decreased spending power and disposable income – That lifestyle you’re accustomed to will no longer be affordable as you dip into your savings to buy necessities. The savings well is bound to dry unless a job is secured. The cash available for purchasing will decrease, which means less sales for companies and less profits. Some companies may choose to increase product or service prices, which in turn hurts consumers’ pockets even further. The spike of the US dollar exchange rate to Kshs 107 late last year is an example of how less disposable income affects us. The excuse “dollar imepanda” (the dollar has risen) that filled the airwaves in every shop should be an apt reminder of what decreased purchasing power means to you.
- Increased insecurity and crime – The risk of unemployment keeps a worker on the edge and affects the value of his/her output had job security been more assured. Fear is a major obstacle in productivity, regardless of the reason. Rate of crime also rises with increase in unemployment. They’re directly proportional. None of us want to see or experience another violent outburst reminiscent of 2007.