Kenya's labor market presents a structural paradox: sustained economic growth coexists with a persistent crisis of hidden unemployment, where millions of working-age adults remain economically active yet lack stable, decent employment. Between 2024 and 2026, this phenomenon has become increasingly entangled with the rapid expansion of the digital gig economy, which has emerged as both a coping mechanism for the unemployed and a new frontier of labor precarity. This study analyzes the relationship between hidden unemployment, defined as underemployment, discouraged workers, and those in vulnerable employment, and participation in digital platform work in Kenya. Drawing on a mixed-methods design combining secondary analysis of Kenya National Bureau of Statistics labor force data (2020–2026), a survey of 384 gig workers in Nairobi, Kisumu, and Mombasa, and semi-structured interviews with 30 platform workers, the study tests five hypotheses examining the economic impact, employment transition patterns, vulnerability levels, policy effectiveness, and future orientation of gig work. Preliminary evidence indicates that while the gig economy has absorbed approximately 1.54 million workers and contributes approximately $1.03 billion (Sh133.37 billion) to GDP, it largely reproduces the precarity of the informal sector rather than providing a pathway to formal employment. Key findings reveal that 53% of ride-hailing drivers rely on platform work as their primary income source, yet hourly earnings fall below minimum wage thresholds, and legal classification as independent contractors excludes workers from statutory labor protections. The study contributes to theoretical debates on labor market dualism and precarity, offers empirical evidence on labor trajectories in digital economies, and provides policy recommendations for extending social protection, strengthening regulatory frameworks, and promoting decent work in Kenya's evolving labor market.