Economic Implications of Aging Population on Labour Market in Kenya

Abstract

Purpose: The study sought to establish and analyze the effect of aging populations on labour market in Kenya. The study employed life cycle theory to explains fluctuations in aggregate savings and investment rates, which are crucial for understanding economic growth dynamics.

Design/Methodology/Approach: This study employed correlational research design to examine the effect of the relationship between aging population and labour market in Kenya. Secondary data was applied, collected from World Bank for the period 2010 to 2023.

Findings: Autoregressive Distributed Lag (ARDL) model was applied to estimate both the short-run and long-run economic effect of demographic shifts on labour market. The ARDL output revealed that R-squared value indicates that approximately 54.35% of the variation in the employment rate can be explained by aging population in the model.

Implications/Originality/Value: The study recommends that encouraging older individuals to invest in entrepreneurial endeavours decreases the economic burden on the younger population, balancing the ratio of dependents to active workers as well creating more jobs. In conclusion, recognizing and harnessing the positive contributions of an aging population can transform potential challenges int