Tanzania's labor market is undergoing a transformation as the country strives to shift more of its workforce into formal employment. As of 2023, Tanzania's workforce stands at approximately 36 million people, with 28% in formal employment and 72% in informal employment. These shifts reveal opportunities for economic growth but also underscore significant challenges in formalizing informal sector employment.

Employment Landscape in Tanzania

The formal sector employs around 10.07 million individuals, with most in the private sector (9.33 million), while the public sector supports approximately 741,967 jobs. In contrast, the informal sector is vast, with around 25.95 million workers, mostly engaged in agriculture, retail, and small-scale manufacturing. This segment lacks job security and benefits, making it vulnerable to economic shifts.

Public and Private Sector Employment

In the public sector, the government allocated TZS 11.3 trillion for wages in the 2023/2024 fiscal year, supporting roles in civil service, healthcare, and education. The private sector's role is crucial, employing nearly 93% of all formal workers and contributing significantly to the national tax base. With an annual salary average of TZS 15.25 million per formal sector employee, private businesses are a vital economic force.

Informal Employment Breakdown

The informal sector is dominated by agriculture and fishing, which accounts for 65-70% of informal jobs. Retail trade employs 10-15%, followed by manufacturing, crafts, and construction. Regions like Dar es Salaam and Mwanza showcase significant informal employment, with informal rates as high as 72%, reflecting regional dependence on informal job sectors.

Key Economic Indicators and Projections

1. Unemployment Trends: Tanzania’s unemployment rate has shown gradual improvement, reducing from 9% in 2021 to 8.8% in 2023 and Projected to reach 8.1% in 2030, marking a positive trend in job creation.
2. Economic Forecast for 2024-2030: Formal employment is expected to increase from 28% to 38% by 2030, driven by growth in sectors such as manufacturing, services, and agriculture. By 2030, approximately 15.8 million individuals are projected to be in formal employment, reducing informal employment rates to 62%.
3. Projected Workforce and Sectoral Growth:
   • Manufacturing and Industry: 25% of the formal workforce
   • Services and Tourism: 22%
   • Modern Agriculture: 20%
   • Construction and Infrastructure: 15%
   • Technology and Digital Services: 10%

Challenges in Transitioning from Informal to Formal Employment

The shift from informal to formal employment involves obstacles, such as:

• Regulatory Barriers: Complicated regulations deter informal businesses from formalizing.
• Skills Gaps: Workers moving from informal to formal sectors often lack necessary skills, impacting productivity.
• Infrastructure Limitations: Insufficient infrastructure, particularly in rural areas, hinders formal sector growth.

Recommendations

1. Expand Formal Sector Support: Simplify business registration and tax compliance processes to encourage informal businesses to transition.
2. Enhance Vocational Training: Align educational programs with formal sector needs to support skill development.
3. Improve Social Protection: Extend social security coverage to include more formal workers, offering a safety net for transitioning employees.
4. Sector-Specific Policies: Introduce targeted policies to modernize agriculture, foster innovation in urban sectors, and promote industry expansion.
5. Invest in Infrastructure: Focus on digital and physical infrastructure to improve business efficiency and facilitate formal sector growth.

Conclusion

Tanzania’s employment dynamics are at a turning point, with formal employment showing steady growth. With careful planning, investment in infrastructure, and strategic policy reforms, Tanzania can continue to transition towards a more stable and secure labor market that benefits both the economy and the workforce.