Sunday May 26, 2024

Realities of unemployment

By Mansoor Ahmad
March 24, 2023

LAHORE: Public around the world generally expects relief and better lifestyle to emanate from government policies, while businesspersons desire transparent policies so they can operate on a level playing field despite a boom and bust. However, in Pakistan they desire relief under all circumstances.

Whenever the economy is under pressure, the businesspersons play the employment card, warning the state that there would be widespread unemployment if their demands for relief and subsidies are not accepted. There are times when the depression is because of global gloom and the government is not in a position to provide needed relief.

There are times like the one we are currently passing through when the domestic economy is in turmoil along with global recession because of the prolonged Russia-Ukraine war.

One can understand that our population that is predominantly illiterate cannot understand the limitations of the state under these circumstances. Businesspersons however are fully aware of the limitations of the state to provide any relief to the public or businesses.

Domestic economic turmoil and global recession has resulted in a wave of layoffs in Pakistan. Some of these relate to global recession and some to domestic policies, where the government lacking resources cannot help.

Entire retrenchments are blamed by the businesses on faulty government policies. But they do ignore the fact that layoffs have now become a permanent feature in the developed and even emerging economies because the trade volumes have shrunk.

Amazon, the largest retail and ecommerce outlet, gave marching orders to 19,000 employees in January and last week another 9,000 were removed from their jobs. Twitter is constantly pruning its workforce and so is Microsoft.

In Vietnam, thousands of workers lost jobs as export orders from western buyers declined. India posted an export decline of over 20 percent in the last nine months that obviously hit employment in the textile sector badly, Cambodia is also going through this process.

Only Bangladesh is an exception where its textile sector has been proactive. Its government imposed similar restrictions on L/Cs as slapped by the Pakistani government.

Bangladeshi government jacked up the power and gas tariff above Pakistan’s. Still its textile and clothing industry is posting growth. It has periodically upgraded technology that is paying off.

The decline in exports of textile and clothing in Pakistan is of the same level as in India, which is a fast growing economy. The unemployment in this sector is there in line with the current global trends. The apparel sector managed to control the decline as it is dominated by small and medium enterprises when the owners know their jobs well.

Even most of those garment exporters that have scaled up, attained this status by graduating from the SME sector. The basic textile sector is in trouble as its cost of production is higher than competing economies.

There is not much protest as we must understand that Pakistan’s economy is sustained by the informal sector that provides employment to the majority of workers at really low wages.

All other formal sectors of the economy are also posting large negative growth because of huge rupee depreciation (it does not impact exporters much), the restriction on imports is impacting them the most.

The government at present has no choice but to squeeze imports as much as possible. Then it has to set priorities. Import of wheat and edible oil cannot be curtailed. The import of crude oil and petroleum products has to be given priority.

The next priority is the import of pharmaceutical raw material and after that come inputs of exporting sectors. Foreign exchange reserves are so low that even these priority imports are curtailed. Government has dragged the threat of default through strict measures. Relief would come once the International Monetary Fund programme resumes.