Unemployment Rate, Trends and Structure in Pakistan 1980 to 2020

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Unemployment

Unemployment is one of the key challenges that Pakistan has been facing since past few decades. The continuous population growth and 64% population of country under 30 years of age, the challenge seems to build up further. United Nations Development Program’s (UNDP) report on Pakistan suggests that Pakistan has around 3.5 million employed individuals in the country and will have approximately 1.4 million individuals joining workforce every year for next few years (Tribune, 2020). The article aims at evaluating the unemployment in Pakistan from 1980-2019, its structure and sector wise distribution and reasons for failure of Pakistani government to create jobs. 

Unemployment in Pakistan from 1980-2019

The chart below shows the unemployment rate in Pakistan from 1980 to 2019.

Unemployment Rate in Pakistan 1980-1990

The unemployment rates in Pakistan during 1985-1990 show values between 3.1% and 3.7%. Employment ratio is directly and positively related to growth in GDP. The GDP growth rate dropped from 10.22% in 1980 to 7.59% in 1985 and 4.46% in 1990. The GDP growth rate in Pakistan from 1980-2019 can be accessed here. The increased GDP during beginning of 1980s was a result of establishment of several large scale industries like Pakistan Steel Mills, Mechanical Complexes, Port Qasim and construction of Tarbela Dam. The construction of these industries increased production in agricultural sector of Pakistan. Due to nationalization process under Bhutto regime and establishment of these industries, the unemployment rates were quite lower.

Unemployment Rate in Pakistan 1991-2005

From 1991 to 2005, Pakistan saw worst unemployment rate figures with unemployment rate jumping to double figures of 6.28% in 1991 to 7.2% in 2000 and then 7.4% in 2005. The era of PPP and PMLN in 1990s saw lack of government seriousness in formulating strategies for GDP growth in the country and instead is tainted with marks of corruption, lack of governance and shift in governments. The resulting high unemployment growth is evident from the graph.

Unemployment Rate in Pakistan 2005-2019

From 2001 onwards, there is a rise in GDP of Pakistan as Musharraf-led government introduced several social and economic reforms in the country along with increased FDI in various sectors (up 23%). The results of these policies are evident from decline in unemployment rates from 7.4% in 2005 to 5% in 2008. Also the expansion of telecommunications sector and privatization of sectors like banking sector created various job opportunities for educated youth.

However, after 2008, with the shift in government, Pakistan suffered badly from economic corruption, terrorism and insecurity on all fronts. The results were rising unemployment rates in the country as the rate reached 6.5% in 2012. The impact of unemployment rates are even more severe considering the rising population of country.

Finally, the last tenure of PMLN saw some improvement in unemployment rate as the decline from 6.5% in 2012 to 5.7% in 2017 which was attributed to better infrastructure in country and lower inflation as well as CPEC project that employed local unskilled labor.

Sectoral Shares of Employment in Pakistan

The chart below shows the distribution of employment by economic sectors in Pakistan from 2009 to 2019.

The three main sectors that contribute to employment rate in Pakistan are Services Sector, Agriculture Sector and Industry Sector. Services sector includes the retail, banks, hotels, real estate, education, health, telecommunication, basic utilities like electricity and gas, media, social services, educational services and healthcare services.

The industrial sector includes textile, manufacturing, shipment, tobacco, electronics, industrial equipment and many more. The chart shows that from 2009 to 2019, agriculture sector employed around 42% of working force in Pakistan while Industry’s contribution increased from 20.99% to 23.65%. The services sector employed around 35% of workforce and the ratio has been same since past whole decade.

This distribution was entirely different for services and manufacturing/ industry sector during the 1950s, 60s, 70s and 80s as depicted in table below.

The agricultural sector had a lion’s share in employment ratio for the country and started declining during the 1990’s. On the other hand, the services sector had less than 10% share in employment of Pakistanis. Mainly this can be contributed to the IT and telecommunications sector that started growing few decades back.

Major Reasons for Unemployment in Pakistan

Pakistan is grappling with issue of unemployment since 1980’s because the ruling parties have failed to analyze the core issues with growing unemployment. Here are some of the core challenges faced by Pakistan that are identified by analysts and global organizations:

Increasing Population and Youth Bulge

The population of Pakistan has increased from 44.9 million in 1960 to 197 million in 2017. This rise in population has not worked positively for Pakistan given the uneducated masses, lack of family planning and lack of preference to educating females. Moreover, the governments in Pakistan have always lacked focus on job creating strategy since 1980’s.

During 1960’s, the unemployment rate was very low because both skilled and unskilled labor had opportunities to work in expanding sectors of agriculture and industry. The agricultural sector employed more than 60% of population and new industries were established (Read here). However, the late 80s, and 90s saw decline in share of agricultural sector. Currently, as the population is expanding, there are less opportunities in manufacturing and services sector due to unstable growth in Large Scale Manufacturing and less skilled workforce available for services sector.

Unstable GDP Growth in Pakistan

As highlighted here, Pakistan has been battling with fluctuations in growth rate since 1960’s due to turbulent political environment and lack of strategic approach to industries. The unemployment rate during 1960s, 1970s and 1980s is lower because of the privatization of industries and establishment of various industries. Pakistan needs a stable and concerned government initiative to achieve a stable GDP growth by introducing structural reforms in manufacturing and agricultural sectors increase employment rate.

Focused Sector-Wise Approach

Pakistan’s unemployment rate is mainly contributed to lack of proper planning by governments specifically after 1980s where sector analysis was never done in relation to population demographics and education. Most of the labor in Pakistan is unskilled and where only 68% children finish primary schools, lack of vocational education in the past has led to creation of a giant unskilled lot. The governments in Pakistan lacked in evaluating that focus on employment generation is highly dependent on the skill level of workforce. The need was to develop strategies and channel investments in sectors that could generate more employment.

Pakistan’s Job Creation Strategy

The present government is focusing on extensive policies regarding generating employment in services and mainly IT sector as well as real estate sector through housing schemes. Latest survey by Pakistan Institute of Development Economics (PIDE) suggests that when employment elasticities of each sector are evaluated, for each 1% growth in GDP, mining sector can generate around 10.4 million jobs, trade can generate around 9.3 million jobs while manufacturing and construction can generate 5.2 million and 1.5 million jobs respectively.  The priority of sectors is very important in this crucial economic period of Pakistan and government should focus on sectors that can generate more employment along with sectors that can contribute highly towards GDP.  Based on this analysis, following sectors can contribute positively towards reducing the unemployment levels in Pakistan.

Mining Sector

There are around 92 known minerals in Pakistan including goal, copper, coal, marble, granite and many others and half of them are being exploited currently which leaves a huge room for operations and employment (Times of Islamabad, 2019). Given the unemployment levels in Pakistan, the government should focus on labor intensive industries like mining to deploy the ready workforce in Pakistan while preparing the younger lot for skills that are more updated and in-line with global trends.  The current government has already formulated its Mineral Policy under which would speed up the process of mapping, royalties, duties, access to mining areas, formation of Mine Magistrates and export processing zones. Given the elasticity of mining sector, government should aggressively pursue eliminating unemployment through mining sector by increasing private and public sector collaborations.

IT Sector

The IT sector growth presents a bright picture for employment generation and significant contribution to GDP. The Pakistan Technology Industry Survey of 2018 showed that on average around 19,000 jobs will be created in IT sector of Pakistan in 2019. The phenomenal growth in freelancing and other software segments during 2019 combined with government’s Digital Policy can increase services sector’s share in reducing unemployment rates in Pakistan. However, unlike labor intensive sectors, the IT sector contributes more towards GDP than increasing employment rates. A classic example can be taken from our neighboring country India, where IT sector contributes around 60% to its GDP but the employment share is only 25% (Invest India, 2020). The government’s focus on IT sector is already a positive indication of future skilled employment of youth thereby, reducing unemployment rate.

Real Estate Sector

Real Estate sector is one of the growing sectors of Pakistan that currently contributes around 2% to GDP of country. The increasing population in the country has resulted in increasing urbanization which raises the need for urban planning and thus, construction companies. Current government is more inclined towards developing this sector as highlighted by the Naya Pakistan Housing Scheme launched in 2019. The aim is to not only cater to urbanization and increasing population but to provide employment to youth and as expected can generate millions of jobs in the country.

If the government maintains its commitment to development of these sector, they alone can reduce unemployment rate in Pakistan significantly in years to come.

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