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June 22, 2021

The labour lows

LAHORE: It looks Pakistan has an oversupply of workforce but a deeper dig reveals the glut is actually of unskilled, or semi-skilled, or illiterate workers, while skilled ones having education above secondary level were acutely short.

The reason behind the joblessness of majority of the workforce is their inability to acquire skills that need a minimum level of education. The nation is facing a strange unemployment dilemma as its industrial and services sectors cannot create jobs for the available low-skilled labour force, while there is dearth of better-skilled workers for which vacancies are available. Entrepreneurs in Pakistan are operating with this huge mismatch of available skills as no serious efforts to enrich its human resource have been made. We are rich in uneducated youth, poor in health and skills.

The ability of an economy to compete globally depends on sustained supply of talented and qualified human resources. Imbalances occur when the availability of workers is inadequate and low skilled. This inadequacy puts immense pressure on the economy that also threatens the social and political stability of the country.

The skill mismatch phenomenon is not restricted to Pakistan. Many emerging economies that are currently enjoying robust growth are at risk of sudden halt in growth because of human capital imbalances. According to Boston Consulting Group only India among BRIC countries is on path to produce a balanced work force till 2030. The other three countries namely Brazil, China and Russia are facing skilled labour shortages though China has overcome the skill shortages. India is our next door neighbour and one must pay tribute to the foresight of their planners in ensuring availability of the right human resource.

Every government claims that it is well aware of the need for a qualified and skilled human resource but has done little in this regards. In many developed economies human capital has surpassed financial capital as the critical economic engine of economic growth. Even these economies are facing skilled labour shortages, while Pakistan besides facing skilled labour shortages is in surplus in unskilled workers as well. Investment is pouring in India consistently in all fields, be it engineering, information technology, pharmaceuticals, or textiles.

We enjoy advantages in textiles but the skills are restricted to basic textiles. Bangladesh that entered textiles 30 years back has trained five times more workers in the value-added apparel sector. Chinese see the opportunity to relocate their value-added textile sector in Pakistan but are moving slowly because of human resource constraints. Some are bringing in their own skilled workforce.

We are losing GDP growth because of labour force imbalances as low-skilled labour results in lower productivity. An unemployment rate of less than 5 percent indicates a possible shortage of labour.

GDP growth rates usually plunge if required human capital is not made available in the economy either through domestic education and training or through immigration. Pakistan has an unemployment rate of over 6 percent but human resource imbalances are impacting its growth as well.

Unemployment or availability of surplus workforce attracts more attention in the society. However the shortage of skilled workforce is equally problematic for the economy. Shortage of skilled workers creates wage inflation but still many vacancies remain unfulfilled which hampers economic growth as it hurts the competitiveness of the economy. A labour surplus leads to attrition of skills that further reduces employability.

Accurate data on employment are essential to plan need-based training of skilled labour. Unfortunately the unemployment data in Pakistan is skewed as all governments try to include as employees every individual earning even if on a part-time basis. This denies the planners the needed statistics about the shortage of skills in the workforce.

Moreover workers operating in a non-documented economy do not appear in the employment statistics. Pakistan is one of many developing economies where numerous small businesses conceal their employees from the labour departments. One way out of this impasse is to start government- and business-sponsored programmes that include training for demand-driven skills. Without industry-government linkages production of required skill may not be possible.

In addition there should be an institutionalised way to ensure the skills of the existing labour force are periodically enhanced, including language and communication. This would engage workers of all ages.