1Unemployment of Pakistan

Introduction
Most governments have objectives to maintain a high and stable level of employment in
their economies, and a low level of unemployment, as employment provides people with
incomes and wealth. Hence unemployment is a central problem as in contrast, its a
wastage of productive resources. Depressing the populations income during such
periods, economic distress also spills over to affect people's emotions and family lives.
Paistan being the !sian country has plenty of problems and unemployment is one of
those. "nemployment has caused numerous problems for its people, as Paistan has
countless natural resources but the problem remains that resources are being wasted
rather being utili#ed efficiently since the independence of Paistan in $%&'. (raduated
masters, )* e+perts, engineers and doctors wondering about for job opportunities could
be noticed due to bad employment system. *he population of Paistan is considered
highly talented and hardworing in the world hence such talent is ignored in Paistan
therefore all these sills of our labor force are harvested by other countries and
contributing to their (DP.
*he liberal economic and fiscal policies of the government may reduce unemployment
rate because they can create new job opportunities and business in the country. *here
is a need to announce an economic revival pacage to stimulate investment and
industrial production, boost e+ports, and broaden the ta+ bases and lower tariffs.
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2Unemployment of Pakistan
Unemployment and its Issues
,or the major -uestions e+planation, as it still remains. !n unemployed candidate is one
who is willing and able to wor in accordance to the sills and current wage rate in the
maret. .hereas, "nemployment is an economic condition mared by the fact that
individuals actively seeing jobs remain unhired. "nemployment is e+pressed as a
percentage of the total available wor force. *he level of unemployment varies with
economic conditions and other circumstances.
*he problem of unemployment means the problem of providing wor to those who are
willing to wor. ! large number of educated and uneducated people, who are capable of
wor and are also willing to do it, roam here and there without any jobs. /o the problem
has assumed an acute form. *here is a large number of people who are either partly
employed or wholly unemployed. *he lives of such people, as well as of their families,
are e+tremely miserable. Paistan cannot claim to be a welfare state so long as this
problem remains unsolved. 0efore discussing the ways and means of solving this
problem, let us first e+amine the causes which have created it.
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3Unemployment of Pakistan
)t is a well1nown fact that Paistan is a thicly populated country. *he population is
increasing by leaps and bounds. 0ut jobs and gainful avenues cannot be created in the
same proportion. /o, naturally, a large section of the people is left unemployed.
Moreover, our education system is also responsible for this problem. *he problem of
educated unemployment is peculiar to Paistan. Paistan is one of the country in the
world where even highly educated persons fail to get employment. 2very year
thousands and thousands of graduates pass out of schools and colleges. *hey are unfit
for any wor, e+cept office wor. !ll of them cannot be absorbed in services. *his
increases unemployment.
*he problem of unemployment is mainly an economic one. )t is essential, therefore, that
the economic policy of the country be overhauled. )n our country, labor is available in
abundance. !venues for employment should be provided for them through cottage and
small1scale industries besides this, stress must be laid on family planning. 2very effort
must be made to chec the rapid rise in population. *his will help a great deal in the
solution of this problem.
More stress should be laid on technical and vocational education. *he present booish
education which produces clers alone should be restricted. .hen people get technical
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4Unemployment of Pakistan
and vocational education, they will not haner after services on completing their
education, they will come out well prepared to stand on their own legs. *he problem will
be half1solved, if this suggestion is implemented.
3oint1family system is gradually breaing down. *his may be a good social change from
certain points of view, but front the point of view of unemployment it is harmful. .hen
we live jointly, some family members get employed in family professions. 4ne who gets
a job, supports others who may not be e-ually fortunate. .e should not be hasty in
breaing down this system.
! country cannot advance economically, politically, or socially, unless this problem is
solved. Many a social evil is spread through the unemployed. ,rustration, drug1
addiction, even suicides are, by and large the evil results of unemployment. "nrest and
disorder increase in society. )t is therefore the duty of the (overnment to mae every
possible effort to solve this problem. However, we may stress again that the problem
cannot be solved till the population e+plosion is not checed. *he two are closely inter1
lined, and the people must be made to reali#e this through and ade-uate process of
social education.
The unemployment rate
)t is defined as the proportion of the labor force classified as unemployed, where the
labor force is comprised of unemployed and employed worers. *he unemployment rate
provides information on the e+tent of unutili#ed labor supply in an economy, and as
such a high increasing rate is generally seen as an undesirable outcome occurrence,
though it may not necessarily be so as for e+ample, in the case of frictional
unemployment which facilitates more efficient worer firm matches and when hitherto
discouraged worers begin to actively search for wor given increased labor demand
such as during times of robust economic e+pansion. 5otwithstanding, prima facie, an
increase in the unemployment rate is to be construed as a negative labor maret
development.
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5Unemployment of Pakistan
Overview of Employment Situation in Pakistan
Paistan is the si+th most populous country in the world with an estimated population of
$67 million and an annual growth rate of 8.79 percent. Paistan is the $7th largest
country in the world according to the si#e of the labor force. *he latest official statistics
based on the :abor ,orce /urvey of Paistan of 8776;7% shows that the total labor force
volume is 9<.'8 million with an annual growth rate of <.' percent. =ural areas have
almost more than double share in the total employment, which is primarily due to the
absorption of employment in the agriculture sector. 4verview of employment situation
which is measured by four indicators, labor force participation rates, unemployment
rates, sectorial share in employment and employment to population ratio. *he particular
focus is on rural;urban differentials and gender dimension of employment.
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6Unemployment of Pakistan
*he labor force participation rates have witnessed an increase of 8.$ percentage points
during the last decade. ,emale participation in the labor maret has gradually
increased. However, it is still very low, around 88 percent. 4verall, the youth have a
lower participation rate than the adult population, but their participation especially of the
young women has gradually increased.
*he overall unemployment rate increased from > percent in 8777;7$ to 6.< percent in
877<;7&. However, it declined during the ne+t four years to 9.8 percent. During this
period, the economy witnessed comparatively high growth and poverty reduced sharply.
)n 8776;7%, the unemployment level remained unchanged, 9.8 percent. However, the
estimates based on ?)! fact boo shows the rising trends in unemployment rates during
last three years. )ts shows that the unemployment rates dropped considerably among
females and in urban areas compared to the male and rural areas, respectively. @outh
unemployment levels are higher than the overall unemployment rate. !mong the youth,
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7Unemployment of Pakistan
female and rural inhabitants have faced the unemployment level higher than their
counterparts. 4verall, the youth unemployment rate has dropped sharply from $<.<
percent in 8777;7$ to '.9 percent in 877>;7'. *his drop in unemployment level is
especially high for females, 87.& percentage points breadowns the total employed
labor force in three sectors, which are agriculture, industry, manufacturing and
construction, and services. !griculture is the largest sector in terms of employment
provision. However, its share in total employment declined by 8.' percentage points
during the last decade, with more decline among the males >.$ percentage points,
probably due to changes in the agrarian structure including a decline in sharecropping
and increased mechani#ation in the agriculture sector. *he services sector has the
second largest share in employment of <9 percent, followed by the industrial sector with
about 87 percent share.
*hese both sectors have witnessed a modest increase in their share in total
employment. )t shows that a shift of labor from agriculture to either industry or services
sector.
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Unemployment of Pakistan
*his shift is primarily among the male worers. )t is worth noting that a large proportion
of female employed labor force wor as unpaid helpers.
*he employment population ratio, which e+presses the number of people in
employment as a percentage of the population, is a good indicator to analy#e the ability
of an economy to absorb its labor with the passage of time.

2mployment to population ratio among females is very low, only 87 percent, as
compared to male ratio, around '% percent. *he male ratio is similar or even higher to
the ratio for /outh !sia. However, the female ratio is much lower than the /outh !sian
average of $%.& percent. )t is encouraging that employment to population ratio among
women has improved by more than si+ percentage points and the gap between male
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!Unemployment of Pakistan
and female ratios has reduced. ,or youth, the employment1to1population ratio increased
by almost 9.6 percentage points during the last decade.
Three Labor Market Indicators
*hree ey measures of labor maret activity are the unemployment rate, the labor force
participation rate, and the employment to population ratio. ?hanges in the
unemployment rate reflect movements in the labor force participation rate and the
employment1to1population ratio. 0y looing across different recession periods and
demographic groups in the charts below, you will see striingly different patterns among
these three indicators.
*he civilian labor force is defined as those who have jobs or are seeing a job, are at
least $> years old and are not serving in the military. ! person who does not have a job
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1"Unemployment of Pakistan
is available for wor and is actively seeing wor is considered to be unemployed.
.here, Aey labor maret indicators include,
The Labor orce Participation !ate
!s this rate is calculated by dividing the number of people in the civilian labor force by
the total civilian population of those $> years old or older.
!bove *able represents the labor force participation rates survey done by Paistan
bureau of /tatistics, from which it can be determined that what is our labor force and the
unemployment rates and can compared for a ,airer decisions overview.
The Unemployment !ate
*he unemployment rate is computed by dividing the number of unemployed by the
number of people in the civilian labor force. !nd that number is multiplied by $77 and
e+pressed as a percentage. Part time worers are considered to be employed.
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11Unemployment of Pakistan
*he basic concepts involved in identifying the employed and unemployed are -uite
simple, the government or the population itself plan and e+ecute their counter
measures.
Employment"Population !atio
/pecifically, this ratio is calculated by dividing the number of job holding civilians who
are at least $> years old by the total number of people in the civilian population within
the same age group.
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12Unemployment of Pakistan
*his ratio will tend to go higher during economic booms and lower during recessions.
!lthough, there are several issues with calculating the unemployment rate. *he
handling of discouraged worers is one point of contention. *his phrase describes
worers who are without a job but are not actively seeing a job because they have
gotten discouraged about their job search. /uch people would not be officially counted
as unemployed, although this is a point of contention. !nother area of dispute has to do
with the inclusion of part time worers as employed. /ome believe that they should not
be counted as employed, especially those who would prefer to wor full time. Due to
definitional disputes with the unemployment rate, many economists prefer to use the
employment;population ratio, which uses numbers that are easily measured and are
well defined. (enerally unemployment is higher during a recession. 2mployment usually
does not pic up until after the economy is coming out of a recession, it is usually
regarded as a lagging indicator for the health of the economy.
#lassifications of Unemployment
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13Unemployment of Pakistan
2conomists mae -ualitative distinctions in the reasons for various classifications of
unemployment. 5ot all unemployment is the same. /ome types are actually positive for
the individual and the economy. 4ther types are bad for the individual but beneficial for
the society. :ast, there is one type of unemployment that is both bad for the individual
and is costly to society. *he three types of unemployment are frictional, structural, and
cyclical.
rictional Unemployment
)s #ero unemployment a good goal for societyB )t is most definitely not. ! #ero percent
unemployment goal ignores the presence of frictional unemployment. ,rictional
unemployment occurs when people voluntarily enter the labor force, or when they are
between jobs for which they are -ualified. )t is frictional because the labor maret does
not automatically match up all available jobs with all available worers. )nstead, job
search re-uires time for the right worer to find the right job. 0oth worers and society
benefit when job applicants are matched to the appropriate job. @ou want mechanical
engineers to get jobs in mechanical engineering, not pet grooming.
*he rate of frictional unemployment is relatively low, and as technology increases and
search times diminish, it becomes even lower. *he advent of online job search sites and
social networing has reduced job search times for many worers. (overnment
incentives create variations in frictional unemployment rates between countries.
(enerous unemployment benefits give worers an incentive to spend more time in
searching for a job and thus increase the rate of frictional unemployment for the country.
Structural unemployment
)t occurs when job seeers sill sets are not in demand because of geography or
obsolescence. !s industries die out in certain regions of the country or relocate to other
regions, the worers may not be able to move with the job. *his leaves worers with a
sill set that is no longer in demand. *hese worers must either retrain or accept a lower
paying job in an industry that re-uires less sill. /tructural unemployment is often the
outcome of what the economists call creative destruction. !s innovation occurs, old
Macroeconomic Group Assignment
14Unemployment of Pakistan
technologies and industries are destroyed, which frees up the resources for the new
technology and its industry.
*he invention of the personal computer was the death nell for the typewriter. !s the
new technology advanced, the old technology and its industry were destroyed. 4ver
time, silled typewriter repair technicians found that their sill set was no longer in
demand and faced the permanent destruction of their jobs. !s this was occurring, new
jobs were being created in the new industry. *he problem for worers is that their sill
sets may not translate into the new industry. *he solution for structural unemployment is
education and retraining.
!nother reason for the presence of structural unemployment is the presence of
efficiency wages in the labor maret. 2fficiency wages are those that e+ceed the
e-uilibrium maret wage. *he purpose of efficiency wages is to encourage worer
productivity. 2mployees who earn efficiency wages now that they are unable to earn
e-uivalent wages with competing firms, so they are motivated to produce more output
for the paying firm. *he efficiency wages have the added effect of enticing more people
to enter the labor maret. 0ecause these entrants are attracted to the efficiency wage
and not willing to wor for the lower maret wage, they represent an increase in the
level of structural unemployment. !s more entrants are attracted to the maret, less1
silled worers face more competition for jobs and suffer higher rates of unemployment.
#yclical Unemployment
*he most insidious type of unemployment is cyclical. ?yclical unemployment occurs
because of contractions in the business cycle. )t is not voluntary, nor is it the result of a
sill set mismatch. During periods of recession, the official unemployment rate
increases as cyclical unemployment adds to the always present frictional and structural
rates of unemployment. *he real problem with cyclical unemployment is that it creates a
feedbac loop. !s one group becomes cyclically unemployed, they cut bac on
spending, which leads to more cyclical unemployment.
5ow we see that in Paistan what is the situation of unemployment and what are
its economic and social impacts. )n Paistan labor force include all persons who are of
Macroeconomic Group Assignment
15Unemployment of Pakistan
ten years and above, and during the period are without wor, currently available for
wor and seeing for wor. )n Paistan unemployment is of structural and cyclical
nature. !ccording to :abor ,orce /urvey $%%>1%', the rate of openunemployment was
>.$ percent and 9.& percent as per :abor ,orce /urvey of $%%&1%9. *his indicates that
rate of unemployment has increased between these two surveys by 7.' percent officially
but unofficially unemployment is much larger than this rate. "nemployment rate in
rural areas is greater as compared to urban areas. 0ecause of industries there are more
chances of employment in urban areas. )n =ural areas businessmen are setting up
industries due to which now rural people see Manufacturing sector for employment. !s
in rural areas there is no proper source of earnings due to which unemployment rate is
increasing. !s agriculture sector is not absorbing them due to adaptation of mechanical
instruments and bad conditions. /mall scale industries are not woring efficiently due to
worse economic conditions. /o rural people are not finding proper source of earning.
!ecommendations and #onclusion
(overnment should mae efforts to push economic growth process. ,or this purpose
2conomic =evival Pacage should announce for the revival of industries sector,
to stimulate production and investment. /econdly (overnment should seriously try to
boost e+ports through broadening the ta+ base and lowering tariffs.
(overnment should announce a pacage for the development of agriculture sector.
0eside this a number of fiscal and monetary measures should tae to attract
industrialists and particularly foreign investment.
More *echnical and Cocational training facilities should be provided. )n this way
unemployed people will get the chance to enhance their sills and become able to
earn reasonable income.
0roadly with a view to reduce unemployment self1employment scheme should be
encouraged in true manners. !t an individual level, the solution to unemployment may
be as simple as getting a job, or getting more training. /ocieties try a number of
Macroeconomic Group Assignment
16Unemployment of Pakistan
different measures to get as many people as possible into wor. However, attempts to
reduce the level of unemployment beyond the 5atural rate of unemployment generally
fail, resulting only in less output and more inflation.
0y curing unemployment, there would be prosperity as well as peace in the country.
0ecause if the people are employed, they are better off.
!lthough Paistan has succeeded to decrease the unemployment rate as compared to
the 67s and %7s but still the unemployment rate in the country can be curtailed by taing
necessary steps.
!eferences
$ook%
$. Dan Moynihan , D 0rian *itley, 877'. Economics. $st ed. (reat 0ritain by 0ell
and 0ain :tdE 4+ford "niversity Press.
&ebsites%
$. /cribd. 87$&. "nemployment in Paistan. F45:)52G !vailable atE
httpE;;www.scribd.com;doc;86'<766<;"nemployment1in1Paistan F!ccessed $&
May $&G.
8. Pa (overnment ,inance. 87$&. Population :abor ,orce and 2mployment.
F45:)52G !vailable atE
httpE;;www.finance.gov.p;survey;chapterH$8;$8Population:abour,orce!nd2mpl
oyment.pdf F!ccessed $9 May $&G.
Macroeconomic Group Assignment
17Unemployment of Pakistan
<. eclac. 87$&. "/2 4, :!04"= M!=A2* )5D)?!*4=/. F45:)52G !vailable atE
httpE;;www.eclac.cl;publicaciones;+ml;7;&'87;lcl$7$>eng.pdf F!ccessed $> May
$&G.
&. Paistan 0ureau of /tatistics. 87$&. :abor ,orce Participation =ates. F45:)52G
!vailable atE httpE;;www.pbs.gov.p;sites;default;files;:abour
I87,orce;publications;lfsH!nnualH87$8H$<;t$&1pa.pdf F!ccessed $> May $&G.
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