URBAN UNEMPLOYMENT LIKELY TO INCREASE

KANWAL SALEEM
Mar 9 - 15, 2009

In the aftermath of global financial crisis, which may lead to decline in the country's exports, urban unemployment is likely to increase sharply especially in large metropolitan areas such as Karachi, Lahore, Rawalpindi-Islamabad and Peshawar.

These cities have absorbed a lot of surplus labour from the countryside in the past couple of decades, analysts told PAGE.

They say the government needs to focus on developing the sectors and lines of products that could help increase export earnings. Pakistan has not benefited from the process of globalisation that led to a much higher increase in international trade. Export-led strategies have helped many Asian countries see sustained economic expansion for decades. Pakistan also needs to trade more with its neighbours, in particular India and China.

With significant structural weaknesses in fiscal and external accounts, the near-term prognosis for Pakistan's economic growth is weak, they added.

According to reports, an estimated US$1.4 trillion has been wiped out from global banking capital, implying that around US $17.5 trillion of lending capacity has evaporated. This is equivalent to one-third of Global GDP of US $55 trillion. No wonder the IMF and World Bank are knelling warning bells.

Two years of global financial and economic meltdown could leave over 50 million people unemployed by the end of 2009, risking social unrest, the International Labour Organisation has warned. That could raise the world's jobless total to 198 million, or 230 million people in the worst case scenario, according to the figures in the ILO's report, "Global Employment Trends 2009".

In 2007, some 179 million people were out of work, it says. "The ILO's message is realistic, not alarmist," Director-General Juan Somavia said. "We have to assume that we are now facing a global jobs crisis."

Officials are more inclined to a middle range scenario of 30 million job losses for 2007-2009, raising the world-wide unemployment tally to 210 million. The lowest range was based on existing International Monetary Fund data but labour experts believe it is already outdated. "I believe the lowest one has already been overtaken," Somavia said. That could propel the global unemployment rate to an average of 6.5 percent, or 7.1 percent in the worst case, for this year, against 5.7 percent in 2007.

The report indicated that 190 million people were jobless by the end of 2008 after 11 million jobs were shed around the world last year alone, based on a combination of official national data and estimates. If that figure were confirmed, the economic crisis could claim two to four times more jobs this year alone. Somavia urged the Group of 20 leading industrial and emerging economies to examine measures to boost "productive" investments, create jobs and bolster social protection, instead of focusing on financial institutions.

IMF chief Dominique Strauss-Kahn criticised the G20, saying they had made little progress in fighting the global financial crisis. Pointing to growing unease about job security, Somavia said: "I think that social unrest is here already. That's why the emphasis we're giving to this crisis is - please don't forget the people." France was bracing for major disruption to transport and public services in a nationwide strike called to protest government policy on coping with the global financial crisis.

DEVELOPED ECONOMIES TO BE MORE VULNERABLE

The ILO figures indicated that developed economies would be hit the hardest by the economic crisis with the fastest rise in unemployment rates, from an average of 5.7 percent in 2007 up to 6.6-7.9 percent in 2009. East Asia, which had the lowest regional unemployment rate at 3.5 percent in 2007, could also experience a jump to 4.5-5.5 percent in a year.

The crisis could also push another 200 million workers into extreme poverty as they eke out a living in informal, underpaid and unstable work, especially in Africa and South Asia, the ILO predicted. That would swell the ranks of the

"working poor" to 1.4 billion, just under half of all the world's working population. Although the absolute jobless numbers would be unprecedented, the impact on the working population in percentage terms would still be well below what was experienced during the Great Depression of the 1930s, labour experts noted.

In a recent working paper on Pakistan, ADB has said that fiscal discipline acts as a deflationary force as it induces excess capacity and unemployment. Pakistan's 165 million people of which one-half are under the age of 17 and about 40 per cent live in urban areas are becoming restive because of the deprivation caused by the severe economic downturn. Security will not return to Pakistan unless the economy is put on a sustainable growth path. That will need considerable work on the part of the government and also help from the community of donors willing to come to Pakistan's aid.