Effect of Economic Growth Course on Youth Unemployment Strategy
Upon receiving an inquiry regarding interest in the Leading Economic Growth course, a quick evaluation was conducted to determine its alignment with current professional commitments. This assessment involved a consideration of the availability of time over a 10-week period to dedicate to this intensive learning opportunity. The decision to participate was met with positive outcomes.
The application process for the program necessitated the submission of an economic growth challenge to be addressed throughout the duration of the course. This requirement aligned well with recent efforts in leading a multi-disciplinary team at USAID/Kenya and East Africa. The team had been focused on the development of a five-year strategy aimed at mitigating youth unemployment. The strategy’s goal was to enhance economically productive opportunities for young individuals in Kenya, enabling their active participation. The course presented an opportunity to explore new analytical methods and potential solutions to this pressing issue. The practical application of theories and concepts introduced in the course was identified as a key component of the learning experience, providing valuable insights for strategy enhancement.
From the outset, Professors Matt Andrews and Ricardo Hausmann introduced foundational principles and frameworks designed to clarify the course’s objective: to lead economic growth by understanding how the economic system generates, distributes, and trades value. The course encouraged a deep dive into the challenges of economic growth, allowing for the categorization of issues into value distribution (highlighting inequalities and exclusion in employment opportunities for youth), value creation (addressing low income or GDP), value trading (focusing on exports), and value generation (improving productivity). This approach necessitated a thorough examination of the participants in the economic system, its beneficiaries, and its overall effectiveness. It was noted that tackling any growth challenge demands systemic change, necessitating a leadership style adept at navigating complex challenges—akin to disrupting the auto industry—rather than merely solving complicated problems, such as fixing a car.
Analytical Approaches to Tackling Youth Unemployment in Kenya
The use of the Ishikawa Diagram, also known as fishbone analysis, served as a foundational tool in dissecting the issue of youth unemployment. This method facilitated the identification and examination of deeper causes contributing to the unemployment challenge. Further investigation through coursework emphasized that growth acceleration could be achieved by addressing specific binding constraints, rather than implementing a broad spectrum of reforms. This theory advocates for the improvement of market performance through the removal of market distortions.
A critical examination of employment statistics in Kenya revealed a distribution with 6 percent of total employment in the formal non-agricultural sector, 49 percent in informal non-agricultural employment, and 45 percent in agriculture. The focus was directed towards the non-agricultural sector, considering its potential for engaging the youth.
The course highlighted the importance of rigorous problem construction and discouraged a solution-led approach, which can lead to ineffective strategies due to poor diagnosis. By the conclusion of the course, the identified growth challenge was refined to the “insufficient generation of good quality jobs for young men and women in Kenya.” Policy action was focused on two main areas: catalyzing formal sector job creation and addressing persistent informality within Kenya’s private sector. These areas were selected based on the industrial sector’s capacity to support economic diversification and job creation, alongside the recognition that informal firms represent the majority (95 percent) of enterprises in Kenya. According to the Kenya National Bureau of Statistics, approximately 700,000 new jobs were created by the informal sector in 2015, highlighting the necessity for higher formalization and productivity to enhance livelihoods.
The selection for policy intervention was further informed by a ‘Triple A’ analysis, assessing the authority to address the issue, acceptance from stakeholders, and the ability, including ideas, capacity, and organizational skills, to implement solutions. This comprehensive analysis facilitated the identification of strategic entry points for policy action aimed at generating tangible results.
Insights and Strategies for Kenya’s Growth
In an exploration of economic growth dynamics, the ‘Scrabble Theory of Economic Development,’ as introduced by Professor Ricardo Hausmann, leverages the concept of economic complexity. This theory suggests that a country’s economic growth is propelled by diversifying into increasingly complex products. The Atlas of Economic Complexity serves as a pivotal resource in understanding how economies expand by adding new products to their export portfolios. An analysis of Kenya’s economic performance between 2003 and 2018 revealed that the country introduced 11 new export products, contributing an additional $5 in income per capita in 2018. To spur economic growth, Kenya is encouraged to facilitate the production of a wider and more intricate array of goods and services.
The concept of the product space, a comprehensive visual representation illustrating the connections between 800 different goods based on empirical data, aids in understanding how countries diversify into related or adjacent products that require similar expertise. Professor Hausmann analogized this diversification process to monkeys navigating a forest, where the density of trees (or products) enables more frequent leaps to new opportunities. This analogy underscores the potential for expansion when firms explore new product categories within their reach.
- Using 2018 data, Kenya’s export economy, valued at $6.04 billion, exhibits moderate diversification across 10 major product categories, albeit with a noted decline in exports over the previous decade;
- Key sectors include textiles and agriculture, with notable advancements in machinery and electronics;
- The product space analysis identifies Kenya as having a variety of relatively complex and well-connected products, positioning the country for new growth opportunities;
- Contrary to initial expectations based on the agricultural sector’s dominance, the analysis suggested a broader range of strategic possibilities for economic advancement.
The strategic recommendation from Atlas advocates for a ‘light touch’ approach, emphasizing the enhancement of existing strengths to venture into more complex production areas. This insight complements earlier analyses by identifying manufacturing, specifically in fast-growing sectors like chemicals, machinery, and electronics, as a viable avenue for bolstering formal sector employment. Given the stagnation in agricultural exports, a pivot towards these dynamic sectors could significantly impact Kenya’s export growth by either increasing the output of existing products or innovating new ones.
Facilitating Economic Growth through Multi-Agent Leadership and Collaboration
The approach to solving complex problems, such as enhancing economic growth and export performance, involves the identification and engagement of key individuals and organizations. This strategic process includes mapping out those entities that could contribute effectively to addressing identified challenges and devising a plan for collaboration. As part of this strategy, engaging with stakeholders like the Kenya Association of Manufacturers is crucial to gather insights on export performance, challenges faced by local manufacturers, opportunities for new product development, and identifying necessary support to boost exports.
The methodology emphasizes exploring the “design space” collaboratively with stakeholders, drawing upon a variety of practices including external best practices, current and latent practices, and identifying instances of positive deviance. This approach facilitates the development of comprehensive and innovative solutions.
Reflections on the Course and Future Directions
The initial insights from the course highlight the significance of applying theoretical concepts to practical challenges, serving as a fundamental learning experience. The course provides clear and actionable tools for understanding the complexities of Kenya’s economic system, the nature of economic challenges, and the leadership needed to unite stakeholders around common goals. The effectiveness of these strategies is contingent upon their implementation and the willingness to experiment and learn from the outcomes.
The course concludes with a broader philosophical reflection on the role of diverse knowledge and collaboration in societal growth. It posits that societies advance and become more productive when individuals with different skills and knowledge connect and collaborate. This exchange of expertise and capabilities fosters a more inclusive and successful collective endeavor. Hence, participants are encouraged to not only seek solutions to economic constraints but also to actively share their knowledge and connect with others to drive collective success and societal advancement.
Conclusion
Addressing the issue of unemployment in Kenya requires a multi-pronged approach that includes government intervention, active leadership, public participation, and private sector engagement. From fostering an understanding of Kenya’s economic system and the nature of the problem to encouraging inclusive growth, tackling unemployment demands a collective effort from all stakeholders.