Employment Trends in Tanzania (2025-2030), Bridging the Formal and Informal Gap

Tanzania’s workforce is 71.8% informal (25.95 million workers) and 28.2% formal (10.17 million workers), highlighting a major divide in job security, wages, and social protection. While formal employment is projected to rise to 38% by 2030, barriers such as limited job availability (42%), skills mismatches (26%), and bureaucratic challenges (21%) slow the transition. This report explores the key trends, challenges, and opportunities in Tanzania’s employment landscape, emphasizing the role of industrialization, digital transformation, and policy reforms in shaping the future workforce.

Key Figures

• 71.8% of Tanzania's workforce (approx. 25.95 million workers) is employed in the informal sector.
• 28.2% of the workforce (approx. 10.17 million workers) is in formal employment.
• The formal employment rate is projected to increase to 38% by 2030.
• 82% of respondents reported that digitalization has increased job opportunities.
• 49% of workers surveyed are in informal employment, while 23% are in formal jobs, and 27% are unemployed.
• 54% of informal workers were unaware of government formalization programs.
• Agriculture employs 28% of Tanzania's workforce, mostly informally.
• Small businesses make up 44% of the informal economy.

Main Issues Breakdown

1. The Divide Between Formal and Informal Employment

• Formal employment offers stability, benefits, and social security, but access is limited due to education, experience, and bureaucracy.
• Informal employment dominates the economy, with workers in agriculture, small businesses, and retail trade.
• Barriers to transitioning to formal jobs include:
  • Limited job availability (42%)
  • Skills mismatches (26%)
  • Bureaucratic registration processes (21%)

2. Education and Employment Trends

• 83% of formal sector workers hold a bachelor’s degree or higher.
• Workers with lower education levels (primary & secondary) are mostly in the informal sector.
• Diploma and vocational training holders find jobs mainly in skilled trades like construction and manufacturing.

3. Work Experience and Job Stability

• 25% of workers have less than 1 year of experience (mostly informal jobs).
• 49% have 2-5 years of experience, indicating a high number of early-career professionals.
• Mid-career workers (6-10 years) transition into formal employment.
• Senior professionals (10+ years) occupy leadership roles.

4. Challenges in Informal Employment

• No social protections (health insurance, pensions).
• Low and unstable incomes due to seasonal work.
• Limited access to financial services (loans and investment).
• Complex business registration discourages small businesses from formalizing.

5. Factors Encouraging Formalization

• 50% of workers are attracted by social security and benefits.
• 20% prefer formal jobs due to higher wages.
• 14% say government incentives (such as tax exemptions) help.
• 16% want simplified formalization processes.

6. Digital Technology and Employment Growth

• 82% of workers say technology has improved job creation.
• 53% reported that mobile banking and e-commerce have boosted employment.
• ICT, fintech, and digital platforms are creating new job opportunities.

7. Job Creation by Sector

• Agriculture (28%) is the largest employer but remains mostly informal.
• Manufacturing (18%) is growing due to industrialization.
• Construction (14%) benefits from government infrastructure projects.
• Technology/ICT (9%) is fast-growing but underdeveloped.

Policy Recommendations

To address these employment challenges, the report suggests:

1. Expand Industrialization and Special Economic Zones (SEZs) to increase formal jobs.
2. Improve Vocational Training to align skills with industry needs.
3. Simplify Business Registration and Taxation to encourage formalization.
4. Enhance Digital and Remote Work Opportunities through ICT training.
5. Introduce Affordable Social Protection Schemes for informal workers.

Conclusion

The Tanzanian labor market is shifting towards more formalization, but challenges like bureaucracy, low education levels, and financial constraints remain. The digital economy and government policy reforms present new opportunities to increase formal employment and improve workforce stability.

Employment Trends by Sector in Tanzania (2025-2030)

Introduction

Tanzania's labor market is undergoing a significant transformation, with a gradual shift from informal to formal employment. As of 2024, 28% of the workforce (10.17 million workers) is engaged in the formal sector, while 71.8% (25.95 million workers) remain in informal employment. This shift is expected to accelerate, with projections indicating that formal employment could reach 38% by 2030, enhancing economic stability, social protections, and tax revenues.

This report explores the dynamics between formal and informal employment, sectoral distributions, and policy recommendations to facilitate a balanced labor market transformation.

Employment Structure in Tanzania

The employment landscape in Tanzania is characterized by the following composition:

Formal Employment Breakdown

Within the formal sector:

• Private sector: 9.33 million workers (91.75%)
• Public sector: 839,213 workers (8.25%)

Formal sector employees contribute over TZS 27.64 trillion annually in tax revenue, which is crucial for funding public services and national development initiatives.

Informal Employment Sectors

Informal employment remains dominant, particularly in agriculture, trade, and manufacturing. The following table highlights the key informal employment sectors:

Regional Employment Patterns

Employment distribution varies significantly across Tanzania’s regions. Major urban centers, such as Dar es Salaam and Mwanza, exhibit a high concentration of informal employment. The following table presents employment distribution in the top ten regions:

Projected Employment Transformation (2024-2030)

By 2030, formal employment is expected to grow to 38% of the workforce (15.81 million workers), while informal employment declines to 62% (25.79 million workers). The sectoral growth projection includes:

Unemployment Trends and Forecast (2024-2030)

Tanzania's unemployment rate has declined from 9% in 2021 to 8.9% in 2022 and is expected to continue its downward trend to 8.1% by 2030.

Key Growth Drivers in Tanzania’s Employment Sector

1. Digital Transformation: E-commerce expansion, digital payment systems, and fintech innovations support business formalization and efficiency.
2. Infrastructure Development: Expansion of road networks, industrial parks, and urban development fosters new formal job opportunities.
3. Industrialization and Value Chain Development: Investments in agriculture, manufacturing, and tourism will support job creation and economic resilience.
4. Education and Skills Training: Aligning workforce skills with market demands will enhance employability in formal sectors.
5. Social Protection Expansion: Improved access to health insurance, pension schemes, and job security will encourage formal employment transitions.

Policy Recommendations for Sustainable Employment Growth

To support the transition towards a more formalized workforce, the following policies are recommended:

1. Facilitating Business Formalization: Simplifying business registration, tax compliance, and access to credit for SMEs.
2. Expanding Digital Infrastructure: Promoting digital literacy and online business opportunities to modernize traditional sectors.
3. Enhancing Labor Market Information Systems: Using data analytics to track employment trends and guide policy interventions.
4. Sector-Specific Support: Encouraging formalization in high-informal sectors like agriculture and trade through value chain integration.
5. Regional Investment Promotion: Encouraging decentralization of formal job opportunities to reduce reliance on urban centers.

Conclusion

Tanzania’s employment landscape is poised for transformation, with increasing formalization expected to improve economic stability, enhance worker protections, and boost government revenue. However, achieving a 38% formal employment rate by 2030 requires targeted policies, infrastructure investments, and skills development initiatives. Addressing the challenges of informal employment and fostering business-friendly environments will be crucial for achieving sustainable growth and a balanced labor market.

By leveraging technological advancements, improving education systems, and promoting public-private collaboration, Tanzania can build a resilient workforce capable of driving long-term national development.