FeaturedNationalVOLUME 19 ISSUE # 32

Rising unemployment: a growing challenge

Good employment figures indicate the strength of an economy, an economy in full gear. On the other hand, joblessness marks an economy working below its potential. According to the World Bank, by the end of 2023, about 81m Pakistanis were eligible and willing to work of whom 5.7 per cent or 4.62m were jobless. But according to the International Monetary Fund estimates, the unemployment rate was 8.5pc in 2023. This means that about 6.9m Pakistanis were unemployed by the end of last year.
The latest figures on the issue have come from Pakistan Economic Survey 2023-24 which says that about 4.5 million individuals are unemployed in the country, with the youth aged 15-24 having the highest unemployment rate of 11.1 per cent. But these figures are old, based on the 2020-21 Labour Force Survey, after which no employment survey has been conducted during the last three years.
According to the survey, the total labour force stands at 71.8m — 48.5m in rural areas and 23.3m in urban areas. The employed labour force is 67.3m: 45.7m rural and 21.5m urban, while 4.5m are unemployed. Moreover, the unemployment ratio is higher amongst females, with 14.4pc of women unemployed compared to 10pc men. The 25-34 age group has the second-highest unemployment rate at 7.3pc, with 5.4pc of males and 13.3pc of females in this bracket unemployed.
An important aspect of the employment structure in the country, as revealed in the survey, is that it has changed over the decades due to technological transformation. Previously, the agriculture sector had been the major source of employment with a 37.4pc share. However, the share of employment in the agricultural sector has shrunk, and now the industrial and services sectors are the largest sources of job creation.
According to ILO’s Employment Outlook report on Pakistan released recently, Pakistan’s labour market has yet to recover fully from the Covid-19 pandemic and the number of persons unemployed is projected to reach 5.6 million this year, an increase of 1.5m since 2021. This estimate matches the IMF’s projected unemployment rate of 8.5 per cent in 2023, up from 6.2pc in 2021. The report also highlights that the female unemployment rate, which is historically at least 1.5 times that of male rates, could reach a high of 11.1pc. According to the ILO estimates, Pakistan’s employment-to-population ratio in 2023 fell well below its pre-crisis trend line at 47.6pc, while the number of unemployed persons is expected to reach 5.6m — a surge of 1.5m since 2021. The country’s employment-to-population ratio is estimated at 47.6pc in 2023, which is nearly two percentage points below the pre-crisis ratio in 2019.
Expert opinion has it that the recent agreement with the IMF and the squeeze on public financing required for its implementation is likely to add further to labour market stress. The deflated job growth and rising unemployment compound the increasing labour market challenges resulting from successive governments’ mismanagement of the economy.
Due to the unending financial crisis, Pakistan’s economy has been experiencing negative growth and inflationary pressures that prevent enterprises from expanding their operations and creating new job opportunities. Economists say that a country’s capacity to generate employment depends upon its available resources, technological base and advancement, and institutional strength. Further, human resources, skills, and technical competence determine the trajectory of sustainable economic growth.
Skill development is an important area to focus on to train the youth to meet the needs of changing market dynamics. To this end the government has taken some steps, including the revamping of the Technical and Vocational Education and Training (TVET) system, fostering skill development. NAVTTC’s skill development-related initiatives and the Prime Minister’s Youth Skill Development Programme are aimed at creating a competent and globally competitive workforce.
The youth skill initiative is a Rs4.9 billion programme for skill training in 39 IT, 53 industrial, and 34 hardcore skills, which currently enrols as many as 56,000 youths. The programme targets the domestic and international job market, especially for Saudi Arabia, the Gulf countries, the European Union, and far-eastern states like Japan and South Korea. The government is also exploring overseas job opportunities to help reduce the unemployment burden on the economy and boost remittances.
The private sector’s role in employment generation is crucial. Job creation is a natural byproduct of a growing economy driven by private enterprise for which the government needs to create a conducive environment. Observers have noted that in the new budget there is no organized effort to create jobs.
On the contrary, the private sector on whose shoulders lies the responsibility of job creation feels that after the withdrawal of tax exemptions in the budget the input cost of many raw materials for industries will become costlier. Similarly, the continuous increases in prices of electricity and gas due to the inefficiencies of the power sector will raise the cost of production for all productive sectors. In these circumstances, it will not be possible for industries and services sectors to add to their workforce.