The unemployment has always been a major issue for both the people and the government. Millions of youth neither have jobs nor are pursuing higher education, which leads to uncertain futures and negatively impacts their long-term employment prospects. This solution is an obvious one. More education leads to a better equipped and competitive workforce that is suitable for more jobs. However, education is a long-term solution for a long-term problem. It will take years for the effects of making education more accessible. Governments can reduce the price of higher education, subsidize skill training, and create incentives for public private partnerships to benefit young unemployed people.
Furthermore, the type of education must also undergo a drastic change. Instead of valuing academics, rote memorization, and grades, schools must begin to develop creativity, innovation, and co-operation, the traits that actually thrive in modern workplaces, to form employable and adaptable youth. To help close this skills gap, employers, schools, and governments need to begin matching training opportunities to job needs and provide space, information access, and trained staff to help boost young people’s skills and confidence. Youth need flexibility to survive in this constantly-changing environment. With high quality education that caters to the needs of the labour market, youth can better equip to find a job.
Encouraging entrepreneurship is widely seen as one of the solutions to the problem, thanks to the jobs a vibrant entrepreneurial organization can create and the path to employment that starting a business provides. Jack Ma, Richard Branson, Oprah Winfrey, Steve Jobs, What great role models to encourage entrepreneurship across the globe. The persistence of high levels of unemployment following the crisis in many advanced economies and in some emerging economies, as well as the build-up of long-term unemployment, have raised concerns around a possible rise in structural unemployment whereas the permanent or persistent component of unemployment that is invariant to the economic cycle.
At the same time, many emerging economies have struggled with chronically high levels of underemployment, with many workers trapped in low-paid, informal jobs which fail to fully utilise their skills. These trends have resulted in significant social and economic costs. Besides the tremendous hardship it has caused to individuals and families, it presents a waste of scarce economic resources, including human capital, and reduces the long-run growth potential of economies. When faced with the youth unemployment crisis worldwide, citizens often turn to governments and experts for guidance and tend to overlook the critical role which youth can play as a strong force for change and innovation. As unemployment continues to hurt the young generation, engaging youth in efforts to address unemployment challenges is more relevant and important than ever.
Opportunities can be created for youth by providing the required tools and training to ensure that they acquire the skills and expertise needed. There are examples of initiatives that have shown promise, but the sheer scale of the issue requires a dedicated and focused effort to succeed. The unemployment rate varies considerably across countries around the world for variety of reasons. We can group these reasons in two categories related to the two broad types of unemployment: cyclical and natural. The cyclical unemployment is related to the current conditions in the economy. When the economy goes into recession, the unemployment rate increases as businesses shed labor.
Conversely, the unemployment rate declines as the economy expands and businesses start to hire people. It usually takes about six months to a year of economic expansion before the unemployment rate starts to decline. Similarly, the unemployment rate starts to increase only after a few months of output contraction. So, in any particular year the unemployment rate in a given country may be high (or low) if the country is experiencing a recession (or an expansion).
The natural unemployment rate consists of two types of unemployment: frictional and structural and is not related to the business cycle.
The frictional unemployment consists of people who are between jobs as they move from one city to another; enter the labor market after they complete their education, or due to other personal reasons. The structural unemployment is related to the structural shifts in the economy. As some sectors decline, e.g. the textile production in the US, and other sectors expand, e.g. health care, people who were employed in the textile sector lose their jobs and have to enter the health care sector. This requires new education and a new set of skills which take time to acquire.
While these people are in the process of transitioning from one sector to another, we call them structurally unemployed. The global unemployment rate is stabilizing after years in a slump due to a faltering economy, the International Labor Organization revealed in “World Employment and Social Outlook: Trends 2018” report. However, unemployment which the ILO says stands at more than 192 million people globally is expected to remain persistently high in many parts of the world.
The ILO reports revealed that unemployment in wealthier countries is expected to drop to 5.5 percent this year, the lowest rate since 2007.
The labor situation has improved in emerging and developing economies, as well. However, the report warns that employment growth in these countries will not keep pace with the increased numbers of people entering the labor market.
Conventional economic wisdom sees a causal relationship between the expansion in economic output and job market. At times, however, economic growth may drive down unemployment or the increase in employment may lag considerably behind that of the output. Likewise, a contraction in economic growth may have a far greater impact on the employment level. The resultant phenomenon is called jobless growth.
Pakistan is among those countries which are facing jobless growth. Before we look at relevant data, it is important to point out that unlike developed economies, in which most of the employment is cyclic; developing countries face a chronic unemployment problem, which is caused by structural constraints to job growth. Therefore, increase in government expenditure or cuts in taxes, which is generally a useful recipe for developed countries, cannot be an effective instrument for shoring up employment level in developing countries.
Coming back to Pakistan, as per the Pakistan Economic Survey, during the 1980s, 6.5% average economic growth was registered. Out of a total labour force of 11.6 million, 11.2 million were employed (including those underemployed) while only 0.4 million were unemployed.The unemployment rate was a low 1.4%. Thus, the 1980s was a decade of high growth and low unemployment.
During the 1990s, the labour force increased nearly three times to 35.1 million. Out of this, 33.1 million were employed while nearly 2 million were unemployed, resulting in a high 5.7% unemployment rate. The 1990s also saw average economic growth decelerate to 4.6%.
However, the contraction of 1.9 percentage points in growth rate was far below the 4.3-percentage-point rise in unemployment rate during the 1990s – a visible sign of jobless growth. The next decade of 2000s saw the average economic growth marginally go up to 4.7%. With a 45.5 million labour force, the unemployment rate rose considerably to 6.8%. Again, this is an index of jobless growth as despite a higher growth rate, the unemployment level went up.From 3.6% in 2010-11, the economic growth rate has been on the rise, except for 2012-13 when it marginally fell, reaching 5.4% in 2016-17. For the current financial year, the growth rate is projected to increase to 5.8%.
The higher economic growth rate has not been accompanied by a proportionate fall in unemployment rate. From 6% in 2010-11, the unemployment rate marginally fell to 5.9% in 2014-15, the last year for which Pakistan Economic Survey or Pakistan Bureau of Statistics data is available. According to estimates of the World Bank, the unemployment rate remained stuck at 5.9% in 2016 and 2017. Thus, it can be safely presumed that 2016-17 closed with 5.9% unemployment rate. The data strongly suggests that Pakistan has been facing jobless growth. The increase in GDP growth has been accompanied by either a higher unemployment rate or a less than proportional fall in unemployment rate.
A first main solution of unemployment in Pakistan lies in expanding the opportunities of jobs and work for all. These steps need to be taken to clear the backlog of unemployment and to provide jobs to the large additions being made to labor-force. Pakistan is a fast-growing economy. There has been an enormous improvement in the unemployment scenario since the time it was recognized as a challenge. The government is implementing various measures for increasing the employment rate. Participation of women and the marginalized groups speaks about the success of the policy measures.
Published in Melange Intl. Magazine September 2018.