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.