LAHORE: Pakistan’s unemployment problem continues to deepen, not because of a wave of mass redundancies, but due to the persistent failure to create new jobs at the pace the economy requires.
Twelve years ago, analysts warned that reduced job creation, rather than retrenchments, was the bigger driver of rising unemployment. In 2025, the story remains painfully similar. The country’s labour force grows by nearly two million people annually (excluding around two million women who are rarely accommodated), yet new investment in manufacturing, construction and services has slowed to a trickle. As a result, fresh graduates and young workers are entering the market only to find limited opportunities waiting for them.
Industrial layoffs have, of course, continued. Rising input costs, stubbornly high interest rates and surging power tariffs have all put businesses under strain. But economists note that the more alarming trend is stagnant private-sector investment. In a healthier economy, even as some firms close, others expand and create more jobs than those lost. That cycle has weakened in Pakistan.
Entrepreneurs remain reluctant to expand operations. Domestic and foreign investors complain of policy unpredictability, inconsistent taxation and an ongoing energy crisis. As a result, capital that could have fuelled job creation remains idle. While government officials frequently promise reforms, businesses remain sceptical, preferring to adopt a ‘wait and see’ approach. This climate of uncertainty has paralysed employment growth. Job creation has not kept pace with population growth, leaving millions of young Pakistanis without meaningful work.
Traditionally, construction and manufacturing were major absorbers of labour. But with construction slowed by high financing costs and manufacturing squeezed by smuggling and expensive energy, these sectors are shedding jobs instead of creating them. Services such as IT and e-commerce are growing, but are far too small to absorb the country’s rapidly expanding workforce.
Those already in work are also feeling the pinch. Many are working longer hours and accepting stagnant or even reduced wages simply to retain employment. With weak trade unions and limited bargaining power, downward pressure on wages is intensifying.
Economists argue that a weak labour market is not just a symptom but also a driver of economic distress. When people remain unemployed for longer periods, consumption weakens, demand slows and businesses become even more hesitant to hire or invest — reinforcing the cycle.
Even during global upturns, Pakistan has failed to ride the wave. Its industries remain stuck in low-productivity activities, while competitors move up the value chain. The result: sluggish exports, declining competitiveness and limited job creation.
Experts stress that the government must treat job creation as a central pillar of economic recovery, not merely GDP growth. This requires a range of measures. Investor confidence must be restored through consistent policy and better governance. The cost of doing business — particularly energy and financing — needs to be lowered. Special attention should be given to labour-intensive sectors such as textiles, agro-processing and housing construction to quickly absorb workers. Skill development must also align the workforce with emerging industries, including IT, renewable energy and logistics.
Pakistan’s challenge is clear: unless millions of jobs are created each year, the country risks social unrest and prolonged economic stagnation. As one industrialist recently remarked, “It is not that we are firing too many workers. It is that we are not hiring enough new ones.”