Tuesday July 05, 2022

Blueprints for prosperity

June 06, 2018

Pakistan needs to keep creating jobs for a whole generation. A five-year manifesto of any political party must lay the foundation for that. But let’s be clear about where Pakistan stands in this regard.

Today, most Pakistanis earn a living from working low-paying and low-productivity jobs. About 115 million people are of working age (15-64). Sadly, some three million Pakistani children between the ages of 10 and 14 work as well. Of the 115 million, an estimated 70 million are in the workforce -- not including those engaged in unpaid jobs. A majority of our workforce is employed in labour-intensive sectors. Close to 30 million earn a pittance from the agricultural sector, about 11 million are engaged in large and small-scale manufacturing, and some five million work in the construction sector. Another 10 million mostly tend to shops in the wholesale and retail sector, whereas over three million are employed in the transportation sector, storage and communication, mostly in trucking and associated activities. This makes nearly 60 million.

This leaves us with the less labour-intensive sectors: over two-and-a-half million Pakistanis are listed in the education sector, over a million-and-a-half are government employees, and almost a million are employed in the health sector. Finally, there are half-a-million workers employed in the electricity, gas and water sectors, and close to half-a-million work financial sector jobs. The rest are in other sectors and some are unemployed.

So, in which sectors would job creation be beneficial for Pakistan? For this, we have to focus on productivity, which is, broadly, the economic output per worker. The rise of prosperity in country after country is a story of shifting from low-productivity jobs to high-productivity ones. And we can see this within Pakistan too. Roughly estimated, the financial sector’s contribution to Pakistan’s GDP last year was translated as Rs1.4 million per worker. This is not the amount each worker took home but the value of the entire sector’s output divided by the number of workers in that sector. Compared to that, the vast agricultural workforce contributed only Rs0.27 million per worker, which is about half of what the manufacturing sector contributed -- Rs0.47 million per worker.

This is a general indicator of how well a sector can reduce its workers’ poverty. Which of these sectors would we want our siblings and children to be in? Before we design a strategy for job creation, we have to look at three factors.

Till at least 2045, Pakistan is expected to have more citizens of working-age than dependents. This demographic dividend is a golden era for any modernising economy. More workers mean more prosperity for a household, but not without education and good jobs. Alas, half of Pakistan’s workforce is illiterate. Moreover, around two-thirds of working-age Pakistanis are earning today. While most of them are men, only 27 percent of working-age women are part of the workforce (world average: 54 percent). At this participation level, an estimated two million young people enter the workforce each year -- more can enter if the rate of women labourers’ participation rises.

Finally, there is a gaping hole in Pakistan’s middle-tier workforce: the vocational and technician level. There are a number of doctors, electrical and civil engineers, and agronomists, but there is a dearth of nurses, electricians, plumbers and trained farm workers. So, how do you score 10 million jobs in five years when you are so many wickets down? Today, job creation must address the low-skill or no-skill uneducated youth as well as the under-employed educated Pakistanis, and also help women enter the workforce. This should all be supported by a historic effort in vocational training and a gradual rise up the productivity ladder.

Some themes are obvious. The agricultural labour must shift to the manufacturing sector. But how? The answer is the introduction of an incentive package for agro-processing industries in rural areas. Pakistan must convert its wheat into high-value products, such as cookies and biscuits, and not just produce low-value flour. The fruit produce should also be converted into finished products like juices and pulp. The dairy and meat sectors also have a similar potential. Before agri-commodities enter such industries, a good amount of labour-intensive activity is needed post-harvest.

Moreover, investments create more jobs, which is why we must pick sectors wherein investment is expected. Pakistan’s expanding auto sector is one place where jobs can be created, particularly among vendors selling to assembly plants. The pharmaceutical industry must be supported for exports, not pressurised for political gains. Pakistan’s IT sector can also generate jobs for the educated youth. In the textile sector, we must follow Bangladesh, which has created millions of clothes-making jobs for low-skill workers, many of them women. Furthermore, Pakistan’s vibrant fashion industry must be given a real incentive to modernise our traditional crafts to suit global markets. Such a strategy combines the skills of both the educated and uneducated to produce a unique value.

Service sector activities require a basic level of literacy. Hence, massive investment in functional literacy and vocational training is necessary. Investment in the construction sector generates activity in dozens of other sectors, producing some high-productivity, as well as middle-tier and labour-intensive jobs. The recently launched mortgage re-finance entity must be capitalised on to anchor financing of low and middle-income housing construction. But along with housing, the government and private-sector investors must construct state-of-the-art primary schools and colleges, healthcare centres, roads in rural areas, sports centres and stadiums, and rehabilitated canals etc. There is a long way to go before Pakistan has too many of these ‘no-regrets’ investments.

In the public-sector, there are two areas where women can also be trained to lead the charge -- education and health. For e-commerce and exports, the postal and railways systems must be expanded. This combines low and high-productivity jobs. However, most of the jobs will be created by small and medium-sized businesses, for which there must be a broad-based policy support. Also, the government must measure what matters and announce the number of jobs created each quarter.

Long-term prosperity entails shifting all Pakistani workers to high-productivity jobs. But the above are all sectors that already exist in Pakistan. For sustained job creation, Pakistan must keep adding higher-productivity sectors to its economy. This can be done in collaboration with China, under CPEC, to shift jobs to Pakistan in areas such as cell-phone assembling, computer accessories and integrated circuits etc.

A word to the wise: create ‘decent jobs’ which bestow dignity on a worker, provides them a decent pay, sick leaves, fair treatment, basic health benefits and pension support. Such jobs bring prosperity as well as peace.

The writer is the author of a forthcoming book on how to deliver prosperity to every Pakistani home.