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.

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.

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.

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.

Effects of unemployment on youth of Pakistan:

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.

 Current Scenario of Unemployment in Pakistan:

Pakistan has the 10^th 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 6^th 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. 

Civilian Labour Force, Employed and Unemployed in Pakistan (Million): Year 2012-13 2013-14 Labour Force 60.34 60.09 Employed 56.58 56.52 Unemployed 3.76 3.58 Unemployment rate (%) 6.24 6.0 Source:  Pakistan Bureau of Statistics (Labour Force Surveys)

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.