Unemployment in Pakistan
Unemployment:
Unemployment occurs when people are without work and
actively seeking work. The unemployment rate is a measure of the prevalence of
unemployment and it is calculated as a percentage by dividing the number of
unemployed individuals by all individuals currently in the labor force. During periods of recession an economy usually experiences a relatively high
unemployment rate According to International Labor Organization report, more than 200 million people globally or 6% of the world's workforce
were without a job in 2012.There
remains considerable theoretical debate regarding the causes, consequences and
solutions for unemployment. Classical economics, New Classical economics and the Austrian School of economics argue that market
mechanisms are reliable means of resolving unemployment. These theories argue against interventions imposed
on the labor market from the outside, such as unionization, bureaucratic work
rules, minimum wage laws, taxes, and other regulations that
they claim discourage the hiring of workers.
Types of Unemployment:
Classical Unemployment:
Classical or real-wage unemployment occurs when real wages
for a job are set above the market clearing level, causing the number of
job-seekers to exceed the number of vacancies. On the other hand, other
economists argue that as wages fall below a livable wage many choose to drop
out of the labor market and no longer seek employment. This is especially true
in countries where low-income families are supported through public welfare
systems. In such cases wages would have to be high enough to motivate people to
choose employment over what they receive through public welfare. Wages below a
livable wage are likely to result in lower labor market participation in above
stated scenario. In addition it must be noted that consumption of goods and
services is the primary driver of increased need for labor. Higher wages leads
to workers having more income available to consume goods and services.
Therefore, higher wages increase general consumption and as a result need for
labor increases and unemployment decreases in the economy.
Cyclical Unemployment:
Cyclical,
deficient-demand, or Kesynesian unemployment, occurs when there is
not enough aggregate demand in the economy to provide jobs for everyone who
wants to work. Demand for most goods and services falls, less production is
needed and consequently fewer workers are needed, wages are sticky and do not
fall to meet the equilibrium level, and mass unemployment results. Its name is derived from the frequent shifts in the business cycle although unemployment can also be
persistent as occurred during the Great Depresssion of the 1930s.
With
cyclical unemployment, the number of unemployed workers is exceeding the number
of job vacancies, so that even if full employment were attained and all open jobs
were filled, some workers would still remain unemployed. Some associate
cyclical unemployment with frictional unemployment because the factors that
cause the friction are partially caused by cyclical variables. For example, a
surprise decrease in the money supply may shock rational economic factors and suddenly inhibit aggregate
demand.
Keynesian economists on the other hand see the lack of demand for
jobs as potentially resolvable by government intervention. One suggested
interventions involves deficit spending to boost employment and demand.
Another intervention involves an expansionary monetary policy that increases the supply of money
which should reduce interest rate which should lead to an increase in
non-governmental spending.
Structural Unemployment:
Structural Unemployment occurs when a labour market is unable to provide jobs for everyone who wants
one because there is a mismatch between the skills of the unemployed workers
and the skills needed for the available jobs. Structural unemployment is hard
to separate empirically from frictional unemployment, except to say that it
lasts longer. As with frictional unemployment, simple demand-side stimulus will
not work to easily abolish this type of unemployment.
Structural
unemployment may also be encouraged to rise by persistent cyclical
unemployment: if an economy suffers from long-lasting low aggregate demand, it
means that many of the unemployed become disheartened, while their skills
(including job_searching skills) become "rusty"
and obsolete. Problems with debt may lead to homelessness and a fall into the vicious circle of poverty. This means
that they may not fit the job vacancies that are created when the economy
recovers. The implication is that sustained high demand may lower
structural unemployment. This theory of persistence in structural unemployment
has been referred to as an example of path dependence or "hysteresis".
Frictional Unemployment:
Frictional
unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. It is
sometimes called search unemployment and can be voluntary based on the
circumstances of the unemployed individual. Frictional unemployment is always
present in an economy, so the level of involuntary unemployment is properly the
unemployment rate minus the rate of frictional unemployment, which means that
increases or decreases in unemployment are normally under-represented in the
simple statistics.
Frictional
unemployment exists because both jobs and workers are heterogeneous and a mismatch can result between
the characteristics of supply and demand. Such a mismatch can be related to
skills, payment, work-time, location, seasonal industries, attitude, taste, and
a multitude of other factors. New entrants (such as graduating students) and
re-entrants (such as former homemakers) can also suffer a spell of frictional
unemployment.
Hidden Unemployment:
Hidden,
or covered, unemployment is the unemployment of potential workers that is not
reflected in official unemployment statistics, due to the way the statistics
are collected. In many countries only those who have no work but are actively
looking for work (and/or qualifying for social security benefits) are counted
as unemployed. Those who have given up looking for work (and sometimes those
who are on Government "retraining" programs) are not officially
counted among the unemployed, even though they are not employed.
The
statistic also does not count the "underemployed" – those working fewer
hours than they would prefer or in a job that doesn't make good use of their
capabilities. In addition, those who are of working age but are currently in
full-time education are usually not considered unemployed in government statistics.
Traditional unemployed native societies who survive by gathering, hunting,
herding, and farming in wilderness areas, may or may not be counted in
unemployment statistics. Official statistics often underestimate unemployment
rates because of hidden unemployment.
Measurement Of Unemployment Rate:
There
are also different ways national statistical agencies measure unemployment.
These differences may limit the validity of international comparisons of
unemployment data.To some degree these differences remain despite national
statistical agencies increasingly adopting the definition of unemployment by
the International Labour Organization.
Unemployment
in Pakistan:
Unemployment is one of the most difficult social issues of market economics.
The unemployment shifts over the business cycles as understood as changes in
aggregate demand relative to aggregate supply. The role of government is also taken care of
to identify the causes of unemployment.
There
are so many reasons of unemployment in Pakistan. The biggest reason is the
insufficient methods of production potential targets in almost all activities
and branches of agriculture. Agriculture contributes almost directly or
indirectly. Unemployment in agriculture sector is due to two main factors.
Firstly, adaptation of latest technology has decreased the demand for farm
labour. Secondly the labour displaced cannot be re-employed by other economic
sectors due to low level of education, unskilled to be used in industries and
due to vicious circle of poverty. Because they do not have enough resources to
initiate small business venture on their own and be able to break his vicious
circle.
The economy of
Pakistan has been facing economic, social and political upheavals in the recent
past resulting in colossal monetary and
material losses. To pinpoint a few, the energy crisis is on the top. Not only
the productivity and efficiency of the industrial sector has suffered a lot,
but it has also added to the suffering of human life human life. In such a
vulnerable situation it is no wonder that unemployment may creep up to an
unmanageable level.
Causes of Unemployment in Pakistan:
Some of the major causes of unemployment
in Pakistan are following:
The first cause is unpleasant as well as
unacceptable condition of law and order and because of this serious situation
foreign direct investment is sliding down,
In survey of Pakistan economically, in
last year current decade FDI was minimum, According to the international
institute of Finance Direct Investment, FDI which fell 32%.
In
2009 the FDI was $3.2 billion but in 2009-10, July to April FDI was totally
$1.8 billion which represent declines of 45 percent.
Agriculture is the
second major sector for the maximum job provision in Pakistan, but nowadays
agriculture sector is facing several challenges such as water shortage, climate changes
and technological backwardness. This causes a decline in jobs. Almost 62% of
population living in rural areas directly or indirectly depend on agriculture
sector. In 200910 the growth of agriculture production was 2% which was against
the target of 3.8%.
The largest and
biggest sector of the economy is industrial sector. 13% of total employment
depends on industrial sector which contributes 18.5% of gross domestic product.
In manufacturing the absorption on employment at around 13% has remained fairly
stable. Another main cause of unemployment in Pakistan is the economic
depression of the world combined with the terror of America, has reduced trade
and industrial activity in
Pakistan. It has not only defaced Pakistan's image in the international arena
but also doubled our expenditures on Armed forces. Pakistan is not attracting
new investment plus these factors have put international investment at risk.
In
2007 American states spent $368 billion in research and development field. The
amount spent on research as well as education, create more specialized fields
and generate more opportunities.
Only
2 percent of the GDP has been spent by Pakistan on education according to 2010
budget which is quiet a small amounts as seen in the region context.
Other
cause of unemployment in Pakistan is the rapid growth of population. At the end
of june 2009, estimated population is 1699 millions, in 2050, it is expected that Pakistan will become the
fourth largest nation of the world in population with growth rate of 2.06
percent. At present Pakistan is sixth in worlds from population point of view.
Many
other causes are the aftermath of the energy crisis. These include a marked
decrease in the productive capabilities of the industrial goods and services,
the galloping rate of inflation, low investment and low saving, causing the
lowering of GPD of the industrial sector. This took the unemployment rate to
ever highest level during the past 60 years.
Unemployment in
Pakistan's youth:
The
problem of unemployment has all along been existed in Pakistan since its
inception. It remained an important issue center in the country therefore,
Pakistan's new generation suffers from this problem a lot. Causes behind the
unemployment of youth are the following:
- Ø There are no vacancies for youth in the market as it is already saturated.
- Ø Education system is not fully equipped to prepare the youth to meet the market demand.
- Ø Because of the population explosion there is unemployment in Pakistan youth.
- Ø In budget fiscal deficit has detracted the ratio of the employment.
- Ø Due to the lack of there is unemployment for Pakistan youth.
- Ø Favoritism in politics is also one the causes of unemployment in Pakistan.
- Ø Copy culture has also contributed to the unemployment in Pakistan.
- Ø Interruption of the political parties in educational institution has also caused unemployment in Pakistan youth.
- Ø Weak, defective and inefficient economic plans and management is also one of the reasons for caused unemployment in Pakistani youth.
The youth are inclined to various social evils and diseases and even commit suicide. Pressure groups are active in the country.
Ø Ratio of juvenile delinquency is on the increase.
Ø Street killing, kidnapping, robbing are taking over the community.
Ø Youth indulge into undesirable activities like smuggling, sale of heroin etc. Social disorder in the society is growing rapidly.
Ø Due to effects of unemployment on youth of Pakistan there is a loss of national talent on which hope of family and future of Pakistan mainly depend.
Pakistan has the 10th largest labour force in the world. According to the Labour Force Survey 2013-14, the total labour force in the country is 60.09 million. Out of this, 3.58 million people are unemployed and 56.52 million people are employed. Pakistan being the 6th most populous country in the world, with population growth rate of around 1.92 percent per annum, is adding a large number of people to the labour force. Youth employment has remained one of the major concerns of the government. Youth in Pakistan face various disadvantages including limited job search expertise, a mismatch between education, aspirations and employers’ requirements and a lack of mobility, among other factors. The government envisions long term investment in human capital through formal and informal education as well as strategically strengthening the links between education and the labor market. Furthermore, entrepreneurial activities among youth shall be increased by providing business wisdom, inspiration and motivation by stressing on the importance of business opportunities. Demand driven technical education along with entrepreneurial education in curriculum shall address the youth unemployment.
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Conclusion:
The present
scenario of unemployment shows a gloomy picture of the future.
Since
unemployment has multifarious reasons as discussed in this paper, therefore the
solution is not simple.
Before
unemployment could be controlled, the whole of economy needs to be put on firm
footing free of corruption from top to bottom among all the members of the
society.
Suggestions:
As
the global trade in service have grown much faster it is imperative that
government should devise policies which encourage and promote relative
education in the particular field.
For
the revival of industrial sector government should announce economic revival
package to stimulate production and investment.
For the
development of agriculture sector government should announce multiple packages.
The
fiscal and monetary measures should attract industrialists, and foreign
investment. Government should provide technical training facilities.
To
break the vicious cycle of poverty, letting free the harassed tenants, landless
people from the iron clutches of the feudal lords, the mafias and the
aristocratic and landlords. Establishing the rules of law for fair justice.
By formulating
short and long plans directed towards just and fair play of the economic
activities in the economy. Opportunities for investment are created through
honest means and the natural and human resources are judiciously utilized in
all productive activities of the economy.
