UNEMPLOYMENT A NIGHTMARE
Quaid-e-Azams dream of exploiting the immense natural resources of the country for the best possible benefit of the people did not come true
By Syed M. Aslam
Jul 05 - 11, 1999
The founder of Pakistan, Muhammad Ali Jinnah, had dreamt of exploiting the immense natural resources of the country for the best possible benefit of the people. Accordingly, he eulogized the people to "work, work and work" to make Pakistan a prosperous state where Muslims of the sub-continent would have better religious, economic and financial freedom unlike the limitations imposed on them by the Hindus in the undivided India.
After over fifty years, today, the dream of Quaid-e-Azam still remains to be materialized as the successive governments failed to exploit the natural and human resources wisely. Arguably, the economy is in such a worsening state which the country never experienced before. It is obvious from the fact that the biggest portion of the budget today goes towards the payments of foreign debts. Little is left for education, health and development. This has taken a serious toll on the employment opportunities in the country where finding a job at all levels is becoming harder by each passing day due to frequent lay-offs in the public sector in particular and private sector in general.
There are many seekers but few jobs. In a society where who you know has replaced what you know as the major criteria for jobs, chances of employment are bleak due to massive downsizing in the public sector. Tens of thousands of graduates leaving the universities every year are finding it harder to find a suitable employment.
Not only it is hard to find a job but the high level of unemployment has also hurt those already employed in a distinct way. With the abundance of workers the employers have leverage to hire and fire at will, play loose with the benefits and offer lower salaries and those who are not satisfied with the working conditions are always welcome to leave. Of course, there are thousands who are willing to fill the space at whatever the salary may be.
Unemployment undermines the economic and social stability of any society. Societies which fail to provide gainful and secure employment to their people invite political instability, social unrest and economic insecurity. The link between unemployment and crime has also been well established.
Employment is also directly related to all industrial and trade activities. These activities slow down when there is a high level of unemployment but increases when it is low. In an inter-dependent world the unemployment issue has taken a global perspective. This is evident from the following example: The average annual rate of growth in global exports was 6.6 per cent during 1965-80. It declined to 4.1 per cent between 1980-91. While the developed world enjoyed the biggest share of the global exports, the slow-down not only affected it but also the developing countries, as declining industrial activities in the former decreased the prices of primary commodities in the latter. In addition, many of the developed countries became more protectionist raising new protective barriers against imports, particularly the competitive products, from the developing countries to further worsen an already bad situation. The situation has worsened with the eroding of trade borders and supersonic speed of communications and transfer of money today.
The socio-economic fall out of the high unemployment rate in Pakistan is evident from the drastic increase in the crime wave. Today robberies, dacoities and kidnapping for ransom have become a fearsome fixture of life in the country. The resultant lack of civil peace and the rule of the law undermines the very basis of all industrial, economic and trade activities in the country. The case for sustainable development for employment can hardly be argued more forcefully.
Economic policy plays a vital role to help keep the unemployment rate under check. According to a UN report, the East Asian economies in the 1980s avoided stagnation and unemployment did so because they got their domestic policies right by prudent borrowing, creative use of foreign exchange rates, promotion of exports, protection of food growers and restraint of nominal wages. All these measures have combined to keep the growth of employment in step with overall economic growth. Can we learn a thing or two from this?
The theme of The First United Nations Decade for the Eradication of Poverty (1997-2006) was "Eradicating poverty is an ethical, social, political and economic imperative of humankind." UN Secretary General Kofi Annan delivering his message on the International Day for the Eradication of Poverty observed on October 17, 1997 that "some individuals today are enjoying wealth on a scale previously unimagined. Yet victims of poverty still endure intolerable forms of deprivation. They continue to be marginalized and excluded."
He also said that though overall, the relative incidence of poverty declined, yet the number of worlds poor has risen considerably as almost one quarter of worlds population still lives in a state of poverty. For instance, he added, the number of people with incomes less than $ 1 a day increased by almost 100 million between 1987 and 1993 and 1.3 million people, one-third of world population, live with an earning of less than $ 1 a day.
One of the primary aims of any government should be the elimination of unemployment. Although achieving zero level unemployment is not only highly impossible but also undesirable at various levels to check the inflationary trend. It is imperative that all governmental policies need to be directed towards achieving this goal. Identifying the problem is the first step towards successfully solving it. However, a look at officially compiled statistics shows that unemployment level in Pakistan is much higher than that portrayed by the government.
This is primarily due to the criteria used for the measurements of labour force, employment and unemployment. Population census and periodic Labour Force Surveys are the major sources of data on labour supply, employment and unemployment in Pakistan. In addition, agricultural census also provides information on employment in the agriculture sector, the biggest employer of labour force, over 44 per cent or 15.98 million people in 1999.
Many changes have been made to define the meaning of labour force and employment in Pakistan The Population Census of 1951 defined the labour force as all persons of 12 years and above were self-supporting, partially self-supporting or seeking work. In 1961, its definition was changed to include all those of ten years and above who were working for profit or wages or helping their family members. Not only the change lowered the age but it also included the unpaid family members in the employed.
Today, Labour Surveys define employment as "all persons of ten years of age and above who worked at least one hour during the reference period [the year] and were either paid employees or self employed." Based on this definition, the total number of employed labour force in 1999 is estimated at 36.2 million.
The basis for the measurement of Labour Force and Employment; all persons of ten years of age and above in the first case and a minimum work of just one hour during the year in the second, tempts to under-estimate the level of unemployment in the country.
For instance, based on a population of 134.5 million today and a participation rate of 28.7 per cent, the total labour force in Pakistan comes to 38.6 million of which 36.2 million were employed. This also shows that only 2.4 million persons were unemployed in the country which reflected an affordable unemployment rate of 6.1 per cent. In fact, unemployment is a much more serious problem than the official statistics show.
This also poses another relevant and worrying question. If the unemployment rate of 6.1 per cent is correct, the employment rate is an ideal 93.9 per cent. Those who know Pakistan, and there are many, find this highly unpalatable.
Unemployment in Pakistan today is prevalent at all levels. It does not spare the highly qualified professionals any more be they doctors, engineers and MBAs. It hurts the illiterates, non-skilled, skilled, educated and professionals alike. However, it hurts the first two disadvantaged classes more than the others.
While the weekend editions of major national dailies appear to be full of help-wanted advertisements they only tend to give a wrong picture of the unemployment situation. Firstly, the majority of jobs advertised are aimed at the highly qualified professionals whose share in the total employment is just 3.6 per cent. There are little or no vacancies advertised for the two biggest occupational groups skilled agricultural and fishery workers whose share is 36.8 per cent and the elementary or unskilled workers whose share is 22.9 per cent. (See Table 1)
In a country like Pakistan, where less than 1.4 per cent of the children, enrolled in primary school, manage to reach universities and professional colleges, the increased demand for professionals in the job market could hardly make any difference for the majority which drops out at all levels of the academic progress. (See Table 2)
The over emphasis on the maximization of the GDP has also led to uneven distribution of income in Pakistan. The data on income distribution, based on Household Income and Expenditure Surveys conducted by the Federal Bureau of Statistics during 1963 to 1994, shows at least four distinct phases of inequality at the ratios of the highest 20 per cent and the lowest 20 per cent income groups.
The first phase between 1963-71 shows that inequality in income distribution narrowed the ratio of highest to lowest 20 per cent income group decreased from 7.1 per cent in 1963-64 to 4.9 per cent in 1970-71. The second phase, from 1971-79 widened the income inequality from 5.4 per cent to 6.1 per cent. Once again, the ratio declined in the third phase, 1984-87 from 6.2 per cent to 5.5 per cent. In the fourth phase, 1987-93, the inequality in income distribution worsened as the ratio sharply rose by 2.3 per cent to 7.8 per cent.
The inequality between the household income shares of the lowest 20 per cent and highest twenty per cent is obvious from the data collected by the Federal Bureau of Statistics from 1979 to 1993. In 1979, the lowest 20 per cent enjoyed a share of 8.3 per cent of the total income while that of the highest 20 per cent was 41.3 per cent. By 1992-93 the share of the highest 20 per cent increased by 7.6 per cent to 48.9 per cent while that of the lowest 20 per cent decreased by 2.2 per cent to 6.1 per cent. The middle 60 per cent share also declined from 47.6 per cent to 45.6 per cent during the same period.
But the statistics also tend to give the false impression about the share of family income due to very basic flaw in the criteria for measurement of the labour force which includes all those over ten years seeking work during the year.
The sharp decline in the household income shares of the lowest and the middle income groups can be attributed to unemployment and under-employment.
Downsizing in Public Sector Enterprises
Today global free trade pacts such as Uruguay Round of the GATT and regional trade alliances such as NAFTA and EU, tie the national economies closer like never before. The communications revolution moves goods, services and capital around the world at a speed never before witnessed in the history of mankind. This economic integration makes it impossible for any country to grow and create employment in this inter-dependent global economy.
These developments impose new constraints on national economies, particularly those in the developing countries like Pakistan, as they limit taxation, interest rates, exchange rates and public sector deficits. Many governments have to suddenly retrench their work force under pressure from the international lenders. This also happened in Pakistan where people in the nationalized financial institutions and public sector companies were entrenched en masse.
True that a swollen and under-employed public service imposed an inflationary burden on exchequers to keep the salaries very low in Pakistan, like all developing countries. The massive retrenchment displaced thousands from their jobs, the majority of which were not well equipped to make the career change. Not only there were no new jobs but even those that exist were seen by the retrenched as low paid, less secure and lower quality than they had left.
The abolishment of octroi, the tax on the inter-regional movement of goods within the country, in the Budget 1999-2000, will result in loss of livelihood to some 100,000 workers in Pakistan. From July all octroi posts in the country have stopped functioning. The privatization of many public sector enterprises such as Karachi Electric Supply Corporation (KESC) would result in further retrenchment of thousands of workers. The unemployment is feared to soar.
While the very purpose of economic policy is to deliver social progress, this particular objective is denied when there is high and persistent unemployment. With the massive retrenchments at all levels and sectors of the civil services will result in rising unemployment in Pakistan. The pressure exerted by international lending agencies to cut the public expenditure will further result in deterioration of job opportunities in the country.
Demand and Supply
In a perfect economic scenario it would be lovely if the supply of labour matches the demand for jobs. Unfortunately, this could only be an utopian situation. Pakistans current employment situation is a nightmare and is feared likely to grow into a problem of more immense proportions unless concrete measures are taken immediately.
With the increasing number of educated people entering the work force every year and the ongoing retrenchment which will continue in future the supply is feared to surpass the demand. Can the government be blamed?
The UNDP report does not exonerate the government from its responsibilities noting that at times of high unemployment when supply supersedes demand in the job market the fault lies with the government. Such a situation means that the governments macro-economic policies fail to ensure the efficient use of resources, particularly of labour.
While most new jobs are created through self-employment and the informal sector. This is true for Pakistan where the government has initiated loans of Rs 10,000 to Rs 500,000 for individuals for small businesses and loans of Rs 500,000 to Rs 5 million for small industries. Till March 27 this year, Rs 5.5 billion loans were sanctioned and Rs 3.9 million was disbursed through the participating nationalized banks under the self-employment scheme.
The government has also established Small and Medium Enterprises Development Authority (SMEDA) to create jobs and facilitate business expansion. The Authority serves as the key institution in designing training programmes for entrepreneurs and organizing workshops and seminars on various topics.
The Prime Minister has announced a public transport scheme under which vehicles would be provided to unemployed persons on easy installments. A repeat of the Yellow Cab Scheme, introduced by the Nawaz Sharif government in its first tenure in the early nineties. The current scheme envisages to provide some 5,000 taxis, 2,000 pickups, 1,000 trucks and buses, 5,000 auto rickshaws and 25,000 two-wheelers. The scheme is expected to provide not only self-employment opportunities to thousands of people but many more indirect jobs in the auto repair and maintenance markets.
But besides creating new job opportunities it is also imperative to rights of the persons who are already employed. Job creation depends on a rapid economic growth which in turn is dependent on good macro-economic management, bureaucratic flexibility and institutional corruption. Good governance and the rule of law are also the two basic domestic basis for the economic growth.
In an inter-dependent world the importance of domestic policies make all the difference to keep the unemployment level in check. A stable and non-inflationary currency plus a high rate of savings and investment are some of the conditions necessary for the sustainable growth needed to create jobs. But this is not all, an effective law and order and an efficient civil administration are also the necessary prerequisites for the economic growth and progress.
Education and Training
The most important contribution that the national governments can make to economic growth and an efficient labour market is education and training. According to the UNDP report there is overwhelming evidence that the best investment countries can make, is the basic education.
The fact that the retrenchment displaced thousands, the majority of whom were not equipped to take up the new activities, and with fewer new job opportunities many of which are less well paid, less secure and of lower quality also pose many challenges for the government in Pakistan. However, while many public sector enterprises were forced to cut their work force the government can still ease the situation by focusing its attention on the transfer of employment from declining to growing sectors.
It is important that the opportunities to increase employment in declining sectors should not be forgotten. For instance, Pakistan has the biggest canal network in the world. While the agriculture sector still remains the biggest employer in the country the project to clean the canals to facilitate smooth flow of water to the end users is a must to increase productivity in agriculture as over 60 per cent of exports pertain to a single commodity cotton. Investment in irrigation can create new jobs in the labour intensive sector of the country.
Tens of thousands of employees in the private sector have lost their jobs during the last couple of years including over 20,000 in nationalized banks and state-run non-banking financial institutions; Pakistan International Airlines, Steel Mills, Karachi Port Trust, Karachi Water and Sewerage Board, Railways, and many government ministries and departments.
Did the golden handshake scheme, encouraging the public servants to take early retirement for a financial package, work? For few in the executive positions whose financial benefits were bigger, choose to invest their moneys in one of many fixed deposit schemes to earn a fixed interest. For most in the lower income groups, the small sums received have long been spent to meet the needs of a particular occasion. Many, both in the high and low grades, are seen hectically searching for a suitable job. Needless to say, those in the lower strata in the semi-skilled and non-skilled grades are the worst sufferers in a job-deficient economy.
All this demands an immediate and affective action by the government.
As global trade in services have grown much faster it is imperative that government should devise policies which encourage and promote relative education in the particular field.
Persistence of unemployment amid poverty is not unusual but it takes a high toll on the economic growth and progress of the country. The relevant question is Whether governments still have the capacity to influence employment? John Langmore, director of the Division for Social Policy and Development of the Department for Policy Coordination and Sustainable Development at the UN Headquarters, replied in affirmative during a press conference in February 1997. He said, "Even though national autonomy is reduced by globalization, there is still a high level of scope for independent action by governments. If governments acted in cooperation, the scope of that action would increase."
He said that one of the problems that had led to the growth of unemployment in the last few years had been corporate downsizing, mainly in large companies. There had, however, also been a fashion for downsizing which had led to more retrenchment that might have been judged to be desirable. The experts now argue that increasing the turnover and profits required not downsizing, but strengthening the innovative capacity and dynamism of enterprise, he added.
A paper, The Employment Challenge, prepared for the UNDPs roundtable conference in 1994, said that "With the conclusion of the Uruguay Round of bargaining in the GATT, the conditions have been established for worldwide freer trade in goods and services. International cooperation is more than ever necessary if full advantage is to be taken of this opportunity to put more people to work."
It is imperative that the government should come up with policies which address the issue of unemployment in the country based on the global realities as only a faster growth in an interdependent world economy can help put the jobless to work. While many measures have been taken by the government to provide jobs to the people thousands still face retrenchment not only in public sector but also in the corporate sector.
It is imperative to provide basic education to the young and retraining to the adults to increase and upgrade employment. They should also be supported by increased and better technical assistance, particularly the transfer of education technology.
Employed Work Force by Major Occupational Groups (1999)
Legislators, senior officials and managers
Technicians and Associate Professionals
Service Workers and Shop and Market Sales Workers
Skilled Agricultural and Fishery Workers
Craft and Related Trade Workers
Plant and Machine Operators and Assemblers
Source: Economic Survey 1998-99
Enrolment In Educational Institutions
(Arts and Science)Colleges
Source: Economic Survey 1998-99