UNEMPLOYMENT, ITS CAUSES
AND EFFECTS IN PAKISTAN
Unemployment, its Causes and Effects in Pakistan
Course: Economics Analysis
Instructor: Dr Allah Ditta
Group Members: Kashan Amjad (ME-23-05)
Muhammad Awais Tasleem (ME-23-12)
Muhammad Umair Rafiq (ME-23-21)
Ahmad Siddique (ME-23-24)
Muhammad Humza Nadeem (ME-23-38)
Mian Shoaib Ahmed (ME-23-40)
Session: MBA Executive (2023-25) / 1st Semester
Date: Wednesday, 3rd January 2024
Institute of Management Sciences
Bahauddin Zakariya University Multan
Abstract
Unemployment in Pakistan is one of the most outrageous problems. We focus on what
degree unemployment impacts Pakistan's economy and its kin. How to resolve this major
problem. With the growing population of Pakistan, it holds a very weak position, it is 99th
in the world in case of unemployment.
UNEMPLOYMENT, ITS CAUSES AND EFFECTS IN PAKISTAN
1. Introduction
a. Unemployment is defined as the ratio of people who want to do a job and
are searching for a job but cannot find a job. Unemployment is considered
a reflection of the economy of a country. Pakistan faced the problem of
unemployment due to its weak economic condition from the start. Inflation
and the lack of industry are the major reasons for unemployment in
Pakistan.
b. There are several reasons for unemployment in Pakistan the problem is too
deep and has been around for a long time. We first have to understand that,
it is not just the economy that affects the rate of unemployment, but the
general interest and mindset of our people play an important role too. The
students have zero consideration of what their future will be they take
engineering, medicine and commerce just because no other segment of
education is developed enough. The majority of them realize afterwards that
these three sectors do not have enough jobs for them. The right future
counselling is required and the education system plays an important part in
guiding them in the right direction. The economy of Pakistan has not been
stable from the beginning, the industry suffered in many ways. There is
political pressure manipulating and becoming a hurdle for the growth of our
industry. Karachi is the centre of 70% of trade in Pakistan and is under the
influence of many political parties. These parties for their gain open and shut
the markets and endanger the economy without any fear. The growing
population and many other factors are the reason for unemployment in
Pakistan. Most of the unemployment is cyclical which is the worst among
all. The problem has roots at the very core of our society. The chaotic
environment and the mental stress level of the people in Pakistan have a lot
to do with the unemployed youth. A margin can reduce the crime rate and
the societal problems we face if we can provide jobs to our talented youth.
Falling into the dark side has everything to do with unemployment.
2. Sequence. The sequence of the study is as follows:-
• Types of Unemployment
• Causes of Unemployment in Pakistan
• Effects of Unemployment in Pakistan
• Suggestions & Recommendations
3. Types of Unemployment. To understand how this unemployment affects
Pakistan, we first have to understand the kinds of unemployment and how to reduce them.
There are five basic types of unemployment:-
a. Fractional Unemployment. The period of unemployment when a
person loses their current job and is in search of another job is called
fractional unemployment. This kind of unemployment is harmless and gives
the basic idea of why we cannot achieve full employment, some of the
employees will always be in transition.
b. Structural Unemployment. The period when the dynamics of work
change and the experience of the people remain the same. The skill set
required for the new jobs becomes rare. The people who have the skills from
their past jobs become useless. Such unemployment is termed structural
unemployment. The main reasons for such unemployment are the industrial
revolution automation etc.
c. Cyclical Unemployment. When the economy has a deficiency of jobs to
provide for everyone who wants to work, many people remain unemployed.
Such unemployment is known as cyclical or Keynesian unemployment. The
demand for most goods falls and in response, less production is required
which will require less workforce.
d. Classical unemployment. Classical or real wage unemployment is
when the employees demand high wages and refuse to work and accept
low wages. Such unemployment is classical unemployment.
e. Seasonal Unemployment. As the name signifies unemployment
occurs in different seasons is called seasonal unemployment. The
workforce of production of wheat will become useless in winter.
4. Causes of Unemployment in Pakistan. There are several causes of
unemployment in Pakistan, some of which are as follows.
a. Growing population. One of the basic problems of Pakistan is the
growing population. According to a report in the coming 2030, the population
of Pakistan will reach 245 million. Let’s just take a second to consider how
much industry will be required to give jobs to that many people. Even if half
of them are eligible and willing to work. The education and skill development
of that many people is becoming increasingly difficult. The factors that are
becoming the reason for this growth of population are as follows
• Illiteracy
• Deficiency of awareness
• Early marriages
b. Defective education system. The education system of Pakistan is
terrible and horrifying. The Pakistani education system is completely
dedicated to creating robots to do jobs. If everyone is going to do jobs for
others, who will create jobs? There is a deficiency of entrepreneurs in
Pakistan. Our education system is focused on 3 main sectors.
• Doctors
• Engineers
• Businessman
When you look at the wider picture there are thousands of other sectors in
which we can find a respectable job. The development of the skills required
for those jobs is undermined in our education system. The promotion of
those sectors and the availability of the skills required for those jobs is an
extreme need in Pakistan.
c. Current Economic State of Pakistan. The economic downfall of
Pakistan is no secret these days. The prices of normal commodities are
extremely high. That is creating a demand deficiency. Many businesses are
falling badly there are estimated 5 hundred thousand people lost their jobs
in previous ten months. Many companies are downsizing and lowering the
wages of their employees to minimize their losses. Due to this most people
in Pakistan are scared to start any new business, thus no new jobs. If the
economic state remains the same the unemployment rate will rise from 6.14
and that is an alarming situation. Extreme measures are required to handle
this economic downfall.
d. Energy Crisis. The basic problem for our industries and factories is the
energy crisis in Pakistan. The load-shedding haunted us for 20 years till
2017. Now we are creating most of our energy through furnace oil. Which
is, let’s face it the costliest. The cost of electricity is so high that the products
we create in our industries cost too much compared to the products of the
world.
e. Shift of our Textile Industries. Due to high electricity, high labour
charges, taxation and other problems in production. Nearly 40% of our
textile industry has shifted to Bangladesh (According to “The News”). If this
keeps on going the textile will completely leave Pakistan, and that will harm
the currently destroyed economy of Pakistan more. The 40% jobs of in
Pakistan’s textile industry are now transferred to Bangladesh.
f. High Taxation Rate. The taxation on raw materials, duty tax, holding
tax, income tax and sales taxes all are causing our industry to downfall
because of that the industry is not flourishing. Industry of any kind will not
and cannot create more jobs and participate in the economy of the company
until the government is by their side and provides subsidies and facilities.
g. Dollar Rates. The dollar rates are getting higher and higher with
every passing day. The raw material we purchase is becoming more and
more unaffordable. The increase in the rate of dolour is becoming poisonous
for our currency. The value is becoming low the product we sell for 1$ in the
international market costs us 167 Rs to us. The export is seriously damaging
and the industries are not producing to export.
h. Retirement Cycle. The retirement age in Pakistan is 60 years. The job one
occupies keeps it for nearly most of his/her life. The jobs are full and the
people working on them are not ready to leave it at any cost. The new jobs
are not created because of the recession in Pakistan. If the retirement limit
becomes 40 or 45 there will be many new jobs every year.
i. Law & Order. The law-and-order situation in Pakistan makes it very
unfavourable in the eyes of foreign investors. The investors are scared to
invest and create an industry in Pakistan. On the other hand, Bangladesh
and India are attracting them with low wages and fewer barriers to entry and
their economy is becoming stronger every passing day. The law-and-order
situation is crucial for foreign investment and industry.
j. Lack of Technology. The up-to-date machinery and technology is a
problem in Pakistan. Our agriculture is still dependent on ancient
techniques. Due to this, we are wasting our time and money. Even
production and the proper use of technology in production are not available
in Pakistan. Many resources like coal, gas, minerals and agriculture can
provide billions of Dollars to this economy with the proper technology and
ways. Places like Gilgit Baltistan, Baluchistan, and Khewra are very rich in
those resources and we can create jobs and industry there if we have the
proper technology
5. Effects of Unemployment in Pakistan
a. Financial Cost for the Economy. The unemployed are under
pressure by the economy as the employed have to bear the cost of the
unemployed too. The economy cannot flourish when the employment rate
is high. The economy and unemployment are interrelated. The economy will
suffer due to unemployment and the unemployment rate will increase with
the downfall of the economy. This vicious cycle keeps on going until the right
decisions are made. Pakistan’s economy is one of its major problems due
to which the unemployment rate is so high and vice versa.
b. Stressed Employees. Unemployment is creating pressure on the
employed sector of Pakistan as well. People are ready to do a job even if
the wages are not according to their needs. The restlessness and pressure
on the employed sector will affect their ability to work and the right position
for the right job cannot be achieved. People will get any job they get and will
stay in those jobs.
c. Effects on Society
(1) Standards of Living. When there are fewer people at home
employed the pressure on the employed persons goes up and the
living standards of their life decrease. If there are 5 family members
and only one is earning the wage will be divided to 5. This will
seriously decrease the living standards of the family. The same is
happening in Pakistan the man is the only bread earner and the
burden of rising inflation is on the shoulders of one person in a family
or two.
(2) Law & Order. The crime rates are directly proportional to
unemployment. Pakistan has a high crime rate so high due to that
very reason. A person doing a job is doubtful to commit a crime. The
time and planning required to break the law and try to get away with
it only comes to an unemployed man. The truth is the people
committing crimes have so much to do with the condition of their life
hold. If starving an honest man can also think about the criminal acts.
(3) Mental Disturbance. The basic problem with unemployment is
the societal pressure and anxiety of not having a job. Being
dependent on someone else makes us disturbed to the very core.
The panic in our youth is due to that most of them are unemployed.
Our economy is not able to provide them with the basic skills and jobs
to earn their livelihood. People of Pakistan have two basic options to
do a job or to do a business. With a recession doing business is a
foolish step. With a lost cause industry, there are not enough jobs for
the people. The tension in the public and mostly the youth is due to
the unemployment rate.
6. Suggestions & Recommendations
a. Population Control. The growing population in Pakistan is a problem
that is getting worse day by day. According to research, the population of
Pakistan will be 245 million by the end of 2030. There is no way a country
can employ that many people. Serious stands are required to control this
growing population. Keeping aside any other problem, this population will
make everyone’s life miserable if not controlled.
b. Development of the Education System. Education in Pakistan is
one of the major issues in the development of a system to create skills and
degrees that can help them get a job. There are many institutions in
Pakistan providing degrees without the knowledge of the jobs available in
the market and the requirements of those jobs. In the ruler areas of Pakistan
to trend to get an education to get a job is very low. Again, serious steps are
required to improve our education system.
c. More assistance to Self-employment. The trend to start new business
should promoted by the government and the entry of new business in the
market should be made easy for everyone. The newer businesses enter the
market the greater jobs will be in the market. The easiest way is, to provide
easy-term loans, ease in taxes and providing awareness to the public.
d. Development of the Industry & new Businesses. Industries are the
job makers for the economy. The only way to progress in this fast-moving
world is to deploy all your resources and create products not only for your
use but for export as well. Some of the most powerful economies of the
world like China, Japan, and the UK have an industrial chain that is
continuously creating products for the whole world. They are earning tons
of foreign trade money through exports and have the lowest rate of
unemployment. Their economy is growing amazingly and people are living
a happy life. On the other hand, in Pakistan industry is not working properly,
and agriculture is not producing enough for our use; the businesses cannot
produce in such an economy. New projects and industries the needed if
Pakistan want to solve unemployment.
e. Reducing Retirement Age. The age of retirement is 60 in Pakistan. If
reduced to 45 to 50 there will be employees that are more productive and
more employed youth. It will benefit everyone the old people in most of the
organization are a liability. It is not easy to understand and work in a rapidly
changing environment.
f. Ensuring Political Stability. The political instability and strikes every
month are harming the economy more. Karachi as a hub of business in
Pakistan is mostly under political pressure. The politics should not interfere
in the matters of business and let the industrial sector grow. The stock
market is manipulated by some big hands in Pakistan the only reason
people are afraid to invest in the stock exchange is because of that. If
everything is fair people will invest their money in the economy and the
economy will grow which will lead to a lower unemployment rate.
g. New Employment Programs. The Rozgar programs and the programs
to provide skills to the youth to get jobs is one of the mottoes of most of the
government for the past 20 years. These programs help the unemployed to
get a job with the help of the government. The need is to create more and
more programs like that so we can get rid of this problem that is affecting
our youth badly.
7. Conclusion. Sustainable economic growth remains crucial for employment
generation and poverty alleviation. Achieving macroeconomic stability, financial
discipline, and transparent policies are essential. The collaboration between rulers and
the ruled, patience, and constructive efforts are vital to resolving the unemployment crisis
in Pakistan. The government must identify and promote sectors that contribute
significantly to growth and employment. The collective commitment to equitable
development is imperative for navigating the challenges of unemployment in a developing
nation like Pakistan.
References
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• https://www.ceicdata.com/en/indicator/pakistan/unemployment-rate
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