FeaturedNationalVOLUME 18 ISSUE # 09

Employment and inflation worries

Many industrial units have either scaled down or suspended operations because of unfavourable economic conditions. Fears are growing about jobs in the country as the situation is expected to worsen with a projected hike in electricity and fuel prices. The country’s growth rate will also remain below 2pc, which means economic activity will slow down and workers would find it difficult to retain their jobs.

According to the Pakistan Businesses Forum, over seven million people in Pakistan’s textile and textile-related industries have lost their jobs. On the other hand, prices have reached an historic high because of domestic and international reasons. However, the performance of a government in the world is assessed by job creation and prices. If a regime creates a fair number of jobs and keeps prices in check, it is called a successful government. If judged by the standards, the present government is a total failure, though it can blame the floods and high international commodity prices for its inability to reduce prices and create jobs. However, people are not willing to accept any excuse.

According to the World Bank, policy uncertainty further complicates the economic outlook of Pakistan, in addition to flood damages and the resultant increase in poverty. It points out an already precarious economic situation in Pakistan, with low foreign exchange reserves and large fiscal and current account deficits, exacerbated by severe flooding, which cost many lives. “Recovery and reconstruction needs are expected to be 1.6 times the FY2022-23 national development budget. The flooding is likely to seriously damage agricultural production — which accounts for 23pc of GDP and 37pc of employment — disrupting the current and upcoming planting seasons and pushing 5.8 million at 9m people into poverty. Pakistan, with low foreign exchange reserves and rising sovereign risk, saw its currency depreciate by 14pc between June and December and its country risk premium rise by 15 percentage points over the same period. Pakistan’s consumer price inflation reached 24.5pc in December on an annual basis, recently coming off its highest rate since the 1970s,” it noted.

The situation is depressing if seen in the global context. According to the International Labour Organization (ILO), more workers will be forced to accept lower quality and poorly paid jobs this year as a result of the global economic slowdown. In its latest assessment of the state of the labour market, the warned of high and persistent uncertainty over the state of the global economy was depressing business investment, eroding real wages and pushing workers back into informal employment, which can involve street vending, housekeeping or picking through landfills.

Overall, the organisation forecast that global employment will grow at only half the rate seen in 2022, at just 1pc for 2023. The slowdown will not only impact further progress towards reducing poverty levels, but also stall the previous rise in living standards for global workers who will have fewer opportunities available to them. “The current slowdown means that many workers will have to accept lower quality jobs, often at very low pay, sometimes with insufficient hours”, the ILO’s 2023 World Employment and Social Outlook Trends report warned.

Economies the world over are suffering as a result of geopolitical tensions, including the war in Ukraine, as well as supply chain bottlenecks, and the uneven recovery from the Covid crisis. Together, those conditions have sparked a period of stagflation – in which an economy suffers high price inflation and low growth – for the first time since the 1970s.

The resulting cost of living crisis, in which incomes have failed to keep up with rising inflation, is also pushing people into absolute or relative poverty across the world, the ILO explained. Price inflation was reducing demand for goods and services from low and middle income countries, threatening employment and quality jobs before they have even recovered fully from the economic effects of the Covid pandemic.

The ILO said the ongoing shortage of better job opportunities, which started during the Covid crisis when lower income workers were disproportionately disadvantaged, was likely to worsen with the projected slowdown, “pushing workers into jobs of worse quality and depriving others of adequate social protection”.

Progress in poverty reduction achieved over the previous decade has largely faltered and convergence in living standards and work quality is coming to a halt as productivity growth slows worldwide. The ILO said it does not expect the drop off in employment growth experienced during the Covid crisis to be recovered until at least 2025, and raised further concerns over a projected slowdown in productivity, which it said was “essential for addressing the interlinked crises we face in purchasing power, ecological sustainability and human wellbeing.

All national and international reports show Pakistan’s economic growth will slow down in the coming weeks. It creates fears about jobs. Prices of food and essential commodities will also increase after a hike in electricity and fuel rates, as demanded by the International Monetary Fund (IMF). The situation will be difficult for Pakistan and its people in the context of jobs and inflation in the coming weeks.