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The Economics of Unemployment in Pakistan

What is required is a far-reaching development of infrastructure and spread of modern technology

By Abdul Waheed
& Nooreen Mujahiid

Sep 11 - 17, 2000

Human resource if effectively employed play a dynamic role in the socio-economic development of a country. The labour force characteristics of a country provide broad indicators to gauge on the one hand how human resources are productively employed in various development pursuits, while on the other hand, how the human beings are benefiting from the achievements in the socio-economic fields. These characteristics have undergone marked changes since independence.

The labour force sample survey form a regular feature of Federal Bureau of Statistics and is conducted on quarterly basis in selected sample areas covering both rural and urban population of Pakistan. The first labour force survey was conducted during July 1963 to June 1964 and reported that out of 16.0 million labour force 0.16 million were unemployed and the unemployment rate was only 0.97%. The survey suspended from July 1964 to December 1964 and restarted from January 1965. During 1965 the total civilian labour force was 16.91 million out of which 0.24 million was unemployed and the unemployment raise to 1.24%. The survey couldn't be conducted in the quarter October-December 1965 and was restricted to urban areas during first two quarters of 1966. From July 1966 to June 1972, the survey covered both rural and urban population of Pakistan. In 1972, the total civilian labour force reported to 19.61 million whereas the unemployment rate was 1.89%. The survey wasn't conducted during the years 1972-1973 and 1973-1974 because housing economic and demographic survey, which was conducted on behalf of census organization, also aimed at collecting similar data. The survey was not conducted during 1978-1979. In 1982-1983 the survey was conducted on a limited scale, concerning on current employment and unemployed levels. The survey reported the total civilian labour force as 29.9 million and unemployed rate as 3.91%. The survey, which was conducted in 1994-95, reported 35.15 million civilian labour forces and 5.37% unemployment rate. Estimated on the basis of population of 137.5 million for mid-year 2000, the total labour force comes to 39.4 million. Of this 2.4 million are unemployed and unemployment rate rose to 6.1 per cent.

Economy

The changes in the growth pattern of the economy over the years have brought corresponding changes in the employment structure though the agriculture sector is still the largest employer but its relative share has declined from 50% in 1993-94 to 44.1% in 1999-2000. The share of manufacturing changes from 10.12% 1993-94 to 11.20% in 1999-2000. The relative share of employed labour forces in trade has increase from 12.8% in 1993-94 to 14.6% in 1999-2000.

The unemployment which is defined as all persons ten years of age and above who during the period under reference were (a) without work i.e. were not in paid employment or self employed (b) currently available for work i.e were available for paid employment or self employment and (c) seeking work i.e had taken specific steps in a specified period to seek paid employment or self employment. According to this definition about 2.4 mill persons of labour forces were estimated as unemployed in 1999-2000. According to labour forces survey 1996-97, the rate of unemployment was 6.1% and 5.4% as per labour forces survey of 1994-95. This indicates that the rate of unemployment has changed between these two surveys by 0.7%. Moreover, the rate of unemployment is also more in urban areas than the rural areas of Pakistan. The annual unemployed labor force by urban-rural areas since 1991-92 to 1999-2000 is given in the table. The available data reveals that the unemployment rate was 6.97% in urban areas and 5.40% in rural areas in 1991-92. This has changed to 7.10% in urban areas and 5.70% in rural areas in 1997-98. Since then it is constant. It should be noted that these are the official figures of unemployment. Most of the people in rural areas and many people in the urban areas don't report that they are unemployed. So the unofficial figures might be much higher than the official data.

The causes of unemployment arise out of different classification of unemployment. In at most all industries there are fluctuations in economic activities so casual unemployment arises because of maladjustment between demand for and supply of labour forces. Similarly, many economic activities have seasonal characteristics. Like agriculture sector in Pakistan engaged labour forces not more than seven months; for the rest of the year, they remain almost unemployed.

Unemployment in Pakistan

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Unemployed Labour Force Unemployment rate (%)

Year

Total

Urban

Rural

Total

Urban

Rural

1991-92

1.93

0.67

1.26

5.85

6.97

5.40

1992-93

1.59

0.56

1.03

4.73

5.88

4.28

1993-94

1.68

0.61

1.07

4.84

6.51

4.22

1994-95

1.89

0.67

1.22

5.37

6.9

4.80

1995-96

1.94

0.68

1.26

5.37

6.9

4.80

1996-97

2.00

0.71

1.29

5.37

6.9

4.80

1997-98

2.30

0.80

1.50

6.10

7.10

5.70

1998-99

2.30

0.90

1.50

6.10

7.10

5.70

1999-00

2.40

0.90

1.50

6.10

7.10

5.70

Source: Economic Survey 1999-2000, Government of Pakistan

New techniques

Unemployment may result from changes in the methods of production or from the growth of new methods and the decline of old ones. So technological unemployment arise when new machinery and inventions are adopted to replace manual labour as in the case of the hand opining and hand wearing industries in Pakistan.

The fractional unemployment may be due to the absence of proper contact between those who want to work and those who want workers and to the mobility of labourers between different occupations. High wages demanded by trade unions during a depression may result in unemployment.

In Pakistan the present situation of unemployment and especially of educated unemployed youth has its roots mainly in the mismatch of the establishment of educational institutions and market changes over time for different professions. The expansion of arts colleges and universities without helping in view the future emerging needs of the economy may lead to imbalances in the labour market.

Today, in Pakistan there's an alarming surplus of university graduates and post-graduate. Moreover, the industries are adopting new technologies, which are capital intensive (or labour saving), the result is that the capital is substituted for labour and hence, increased unemployment.

Unemployment and underemployment are the most serious economic problems of Pakistan. This not only has a serious effect on the standard of living of the people of Pakistan but also have a direct adverse impact on the socio-political conditions of the country.

The lack of effective demand is one of the worst causes of unemployment and underemployment in Pakistan. By stimulating consumption through redistribution tax policy; by stimulating private investment through pursuit of low interest policy or by stimulating public investment in the rural agricultural sector, in the small and cottage industries and household production, can bring down the unemployment and underemployment.

The labour force has grown at an annual rate of 2 .7 per cent as against the population growth of 2.4 per cent during the last eight years. This growth causes problems in the agriculture and non-agriculture sectors. Even the development of the non-agricultural sector cannot absorb the entire increase in the labour forces if the present rate of population growth is maintained. So it seems unrealistic to attempt to do something on the economic side and to do few things on the population side. What is needed is a comprehensive population control policy through (a) a programme of strategic immigration; (b) a sustained and vigorous birth control campaign; (c) a rapid industrialization; and (d) expansion of agriculture sector.

What to do

What is required is a far-reaching development of infrastructure, spread of modern technology in all sectors and above all, regional development approach to planning in Pakistan. There is a need to organize the labour market on a rationalized basis by establishing not only more employment offices but also inducing compulsory registration for unemployed people and recruitment through placement agencies.

In conclusion, it may be said that unemployment is a great socio-economic problem. It is the parent of social unrest and turmoil to a great extent of individual poverty. In youth, it is one of the greatest causes of anguish and misery. It spells starvation, disease and death on its victims. Dishonesty, corruption, crime, sin and violence of all kinds prevail in a society where population is unemployed on a large scale.

Sustainable growth cannot be achieved without improvement in literacy and employed levels of both the sexes. Since the problem of unemployment in Pakistan is quite serious, we must have short term and long term policies for tackling this issue.

(The authors are lecturers at the Department of Economics, University of Karachi.).