Unemployment is one of the major problems faced by Pakistan. Rise in the ratio of unemployment results in wastage of resources, increase in crime rate. Pakistan is blessed with countless natural and human resources like IT professionals, doctors, engineers, and researchers but they can’t find sufficient job opportunities due to inefficient employment system.
Now we see that in Pakistan what is the situation of unemployment and what are
its economic and social impacts.
In Pakistan labor force include all persons who are of ten years and above, and
during the period are without work, currently available for work and seeking for
work. On the basis of the existing population of 142.87 millions with Labor
force participation rate of 27.46 percent, the total labor force comes to 39.24
million. According to this about 2.4 million persons of labor force were
estimated as unemployed in 1999, as construction and transport sectors have
absorbed 11.2 percent, 6.8 percent and 5.7 percent, compared to 10.5 percent,
7.2 percent and 5.0 percent respectively in 1994-95.
First of all we see the Sectoral employed Labor force.
According to Labor Force Survey 1996-97, the rate of open unemployment was 6.1
percent and 5.4 percent as per Labor Force Survey of 1994-95. This indicates
that rate of unemployment has increased between these two surveys by 0.7 percent
officially but unofficially unemployment is much larger than this rate.
Often it is perceived that unemployment rate of rural areas is greater because
in rural areas there are less chances of employment as compared to urban areas
where there are more chances of employment due to more industries. So now we see
the annual unemployed labour force by urban/rural areas since 1993 to 1999,
which is given in table below:
It is obvious from the above table that in Pakistan unemployment rate is
increasing in both rural and urban areas in absolute as well as in percentage
terms. Unemployment rate in rural areas is greater as compared to Urban areas.
Because of industries there are more chances of employment in Urban areas. In
Rural areas businessmen are setting up industries due to which now rural people
seek Manufacturing sector for employment . As in rural areas there is no proper
source of earnings due to which unemployment rate is increasing. As agriculture
sector is not absorbing them due to adaptation of mechanical instruments and bad
conditions. Small scale industries are not working efficiently due to worse
economic conditions. So Rural people are not finding proper source of earning.
It is clear from Percentage distribution of employed persons by major industries
From Okun's law we know that for every 2% fall in GNP relative to potential GNP,
the unemployment rate rises by 1% point. High unemployment is a symptom of waste
— for during recessions, when unemployment is high, the economy is not producing
up to high level. When economy is not producing sufficiently, we can say that we
are unable to use our full resources for production purposes. Economy will not
grow as fast as it can if become able to produce at high level.
However large the cost to economy of unemployment, a recounting of Rupees lost
does not adequately convey the human, social and psychological toll that periods
of persistent involuntary unemployment bring.
Although unemployment has plagued capitalism, the Industrial Revolution,
understanding its causes and costs has been possible only with the rise of
modern macroeconomic theory. It is apparent that recessions and the associated
high unemployment are extremely costly to the economy.
Unemployment is classified into three categories (a) Frictional unemployment
(workers who are simply moving between jobs (b) structural unemployment (workers
who are in regions or industries that are in persistent slump) (c) cyclical
unemployment (workers who laid off when the overall economy suffers a downturn.
In Pakistan unemployment is of structural and cyclical nature.
Understanding the sources of unemployment has proved one of the major challenges
of modern macroeconomics. Voluntary unemployment may be or when qualified people
chose not to work out the going wage rate unemployment occur. The key element in
understanding involuntary unemployment is the inflexibility of wages in the face
of economic shocks. The same situation is in Pakistan, inflexibility arises
because of costs involved in administering the compensation system.
The upward creep in the natural rate arises mainly because of demographic trends
particularly the higher proportion of teenagers in the labour force. In
addition, government policies are also increasing unemployment rate i.e. Golden
Shake Hand, ban on jobs increasing unemployment rate.
Role Of Government
The government is trying to reduce the unemployment rate. Under Prime Minister's
Self Employment Scheme, different Banks and Small Business Finance Corporations
are extending loans to unemployed youths and skilled professionals having
diploma/degree and business experience. Loans ranging from Rs.10,000 to be
Rs.500,000 for small business and from Rs.500,000 to Rs.5,000,000 for small
industries etc. Small Business Finance Corporation is playing role in reducing
unemployment. Upto March 1999, the Small Business Finance Corporation has
sanctioned Rs.2,208.4 million, against amounting to Rs.1,551.95 million have
been disbursed to 9,383 persons.
The SBFC has generated employment for 28,149 persons under the Prime Minister's
Self-Employment Scheme upto March 31, 1999. A Small and Medium Enterprises
Development (SMEDA) has been setup for growth and development of self-employment
schemes in Pakistan.
During the year 1998 about 104,000 persons have been sent abroad for employment
under Govt. overseas employment schemes.
The liberal economic and fiscal policies of the government may reduce
unemployment rate because they can create new job opportunities and business in
the country. There is a need to announce an economic revival package to
stimulate investment and industrial production, boost exports, broaden the tax
bases and lower tariffs.
In addition, construction of additional motorways and setting up of industrial
zones throughout the country would also generate new opportunities for
employment in the country.
1) Govt. should make efforts to push economic growth process.
For this purpose Economic Revival Package should announce for the revival of
industries sector, to stimulate production and investment.
2) Govt. should seriously try to boost exports through broadening the tax base
and lowering tariffs.
3) Govt. should announce a package for the development of agriculture sector .
4) Beside this a number of fiscal and monetary measures should take to attract
industrialists and particularly foreign investment.
5) More Technical and Vocational training facilities should be provided. In this
way unemployed people will get the chance to enhance their skills and become
able to earn reasonable income.
6) With a view to reduce educate unemployment, self-employment scheme should be
encouraged in true manners.