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January 29, 2016

Unemployment rate highest in 13 years

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January 29, 2016

Educated class hit the most

ISLAMABAD: Unemployment rate in Pakistan during the present government is the highest in the last 13 years while the educated class is more than twice jobless as compared to the illiterate, the Institute for Policy Reform (IPR) claims quoting the recently released government’s Labour Force Survey 2014-15.

It added that over one million males aged between 15 to 29 years are neither undergoing education nor searching for a job and thus are perhaps more vulnerable to crime and militancy.

In its January 2016 report, the IPR though complimented the Pakistan Bureau of Statistics for the recent release of the findings of the latest Labor Force Survey of 2014-15, highlighted some really disturbing facts about the growing unemployment in Pakistan.

According to the IPR report, “The reported unemployment rate is just under 6%. Apparently, it has fallen slightly from the level in 2012-13. However, if appropriate adjustment is made the unemployment rate rises to 8.5% in 2014-15. This is the highest rate of unemployment in the last thirteen years.”

Again relying on the outcome of the government’s survey, the report added, “An extremely worrying feature of the current unemployment situation is that the rate among literate workers is more than twice that among illiterate workers. In fact, the highest rate of unemployment, three times above the national average, is observed in the case of highly educated workers with either degree or post-graduate qualifications.”

The report said, “Similarly, the unemployment rate among female and young workers is also relatively high. There is little difference in the unemployment rate between urban and rural areas of the country. After 2012-13, the unemployment rate has improved the most in Khyber-Pakhtunkhwa. However, employment growth has been the fastest in Punjab.”

Regarding the survey, it is said that 33 such surveys have been carried out by the Pakistan Bureau of Statistics. The coverage is nationwide. The sample size was 42,108 households in the 2014-15 survey. Information is provided on the level and characteristics of the labour force and employment, the level of unemployment, the number of hours worked, the occupational distribution and wages.

According to the IPR release, its fact sheet focuses on developments in the labour market of Pakistan. Between 2012-13 and 2014-15, only 1.3 million workers apparently entered the labour market. Historically, the number entering used to be 1.5 million workers per annum.

Therefore, given the conditions in the labour market, almost 1.7 million potential workers have either opted not to join the labour force or there has been a major understatement of the labour force size by the PBS. Between 2012-13 and 2014-15, the number of jobs created was 1.4 million. Accordingly, the decrease in the number of unemployed workers was 100,000.

As such, by the end of 2014-15, the number of unemployed workers was 3.6 million. However, if the number of discouraged workers is included and the normal increase in labour force allowed for, the total number of unemployed rises to 5.3 million.

The report said that significant changes have occurred in the sectoral distribution of employment. Employment has fallen somewhat in agriculture. The positive finding is that almost two-thirds of the new jobs created during the last two years have been in the manufacturing sector.

It added that only one-third of the additional jobs are in the services sectors, which largely fall in the informal economy. The prospect of finding ‘decent work’ is much higher in the formal sector. Currently, about 27% of the workers are engaged in the formal sector.

It also said that an important development is the trend towards increased labour force participation rate of women in Pakistan, which is currently one of the lowest in the world. It has risen significantly after 2008-09 by almost three percentage points, to reach 22%. Meanwhile, the labor force participation rate for males has actually fallen by 1.5 percentage points.

Regarding the wages, the report said that between 2008-09 and 2014-15, real wages have increased for technicians and professionals, while that for unskilled workers have fallen. The skill premium is rising in the economy. There has also unfortunately been some increase in the gender wage differential for similar skills in the last six years.

In the context of the employment situation, one disturbing feature is the number of idle males aged between 15 to 29 years. These individuals are neither undergoing education nor searching for a job. There are over one million such idle young males. They are perhaps more vulnerable to crime and/or militancy.It is unfortunate that the Youth Employment Programs launched by the government have not been so successful in inducing productive engagement in the labour force.

A significant positive trend is the decline in the number of child workers by over 14% since 2012-13. Focus on this problem has increased following the granting of GSP plus status to Pakistan by the EU, conditional on adherence to 27 international conventions. Eight of these conventions relate directly to labour. The Government of Punjab, in particular, is making efforts to reduce child and bonded labour in brick kilns. A special incentive is being offered for sending the child to school.

The overall message is that both positive and negative developments are observed in the labour market of Pakistan. For a sustainable unemployment-reducing situation to develop, the growth rate of the GDP will have to rise to over 6%. Simultaneously, the state and the private sector will both have to invest more in improving the skill endowment of the labour force.