Revealed: Why millions are unable to afford Sh387 daily spent

Kenyans face rising living costs as job shortages and higher fuel prices threaten household incomes. [iStockphoto]

Kenya's shortage of quality jobs could push up to 2.4 million more people below the poverty line this year, with the World Bank warning that rising fuel prices and widespread informal employment are squeezing household incomes.

The lender estimates that the country's poverty rate could rise by between two and 4.5 percentage points in 2026, depending on how much higher fuel prices are passed on to consumers. That would leave an additional one million to 2.4 million Kenyans unable to afford basic daily needs, unable to even spend at least Sh387 ($3) a day. Urban households are expected to be hit the hardest because they rely more on commercial transport and energy.

The warning comes as about 800,000 Kenyans enter the labour market each year, but only around 100,000 secure formal employment. Most are absorbed into the informal sector, where jobs are often unstable, low-paying and lack social protection.

According to the World Bank, Kenya's biggest labour market challenge is job quality and not just job creation, with many workers trapped in low-skilled self-employment. The lender projects Kenya's population will reach 63.9 million by 2030, with 22.3 million people aged between 15 and 34, adding further pressure on the labour market.

Development economist Patrick Muinde said the dominance of informal employment leaves many households vulnerable to economic shocks because of unpredictable cash flows.

“The informal nature of the economy means that most people get their income on a daily or weekly basis without a predictable pattern,” Muinde said.

Although the formal labour market improved in 2025, the gains remain limited. Formal wage employment grew by 3.1 per cent, up from 2.4 per cent in 2024, with manufacturing, financial services and electricity recording the fastest growth. The private sector added about 54,500 wage jobs.

Real wages also increased for the first time in five years. According to the 2026 Economic Survey, average real annual earnings rose to Sh678,800 from Sh665,400 in 2024.

However, the World Bank says the gains risk being eroded by higher fuel costs following the Middle East conflict, which drove diesel prices up by 17.9 per cent and petrol prices by 10.8 per cent between March and April. The lender says creating more productive formal jobs through stronger private sector investment and faster economic growth will be critical to preventing more Kenyans from falling into poverty.

According to Dr Abraham Rugo, Chief Executive, Bajeti Hub, real incomes have been on a downward trajectory since 2020.

Rugo explained that even when inflation does increase by a small margin, it is still growth.

“But salaries and real incomes are not going up. That means the money within the economy is not circulating,” Rugo said.

A protestor holds a plate of ugali outside parliament buildings. [File, Standard]

The 2026 Economic Survey Report by KNBS shows how real wages have stagnated. However, real wages improved in 2025 for the first time in five years.

According to the Economic Survey 2026, the real average earnings per employee reached Sh678,800, an increase from Sh665,400 in 2024. The private sector earnings rose to Sh716,100 while the public sector experienced a decline of 2.2 per cent, bringing the real average earnings down to Sh600,600 during the same period.

“Sometimes, if wages do not increase to match inflation, or if they do not grow given a stagnation of economic growth, it means companies are not able to increase salaries to catch up with inflation,” says Muinde.

In early 2026, economic conditions deteriorated following the onset of the Conflict in the Middle East, which intensified inflationary and external pressures.

As a result, transport prices increased by 10 per cent year-on-year in April 2026 and remained elevated at 9.8 per cent in June, while food prices rose by 8.8 per cent in April and 8.6 per cent in June 2026.

“Between March and April 2026, diesel prices increased sharply by 17.9 per cent and petrol prices by 10.8 per cent, reflecting disruptions to global oil supply chains,” the World Bank report said.

“This has put upward pressure on transport costs, household purchasing power, and firms’ operating expenses”.