Monday, July 9, 2012

Unemployment in Pakistan: What are the reasons?

Unemployment is that percentage of people in economy who are willing and able to work but who are not working. In Pakistan mostly unemployment exist when a person become lazy or unappreciated in the job whereas companies hiring and firing also effect unemployment rate.

Unemployment rate is defined as “The percentage of labour force that is unemployment”. The existing unemployment rate in Pakistan is 15.40% (2010 est.)

Unemployment is always considered to be killing for an economy as it has negative impacts on the economy. Government will have to forgo its other projects and provide unemployment benefits to the unemployed so that they don’t get indulged in to non desirable activities such as crimes, robbery etc.

Pakistan is faced with cyclical, Technical. Structural and seasonal unemployment .The most horrible part is that it is rising every year which in long term will demonstrate to be hazardous for the economy of Pakistan.

Unemployment may result in the methods of production or from the growth of new methods and the declines of older ones. So in case of the hand opining and hand wearing industries in Pakistan, technological unemployment arises when new machinery and inventions are adopted to replace manual labour. Moreover, the industries are adopting new technologies, which are capital intensive (or labour saving); the result is that the capital is substituted for labour and hence, increased unemployment.

High wages demanded by trade unions during a depression may result in unemployment. The absence of proper contact between those who want to work and those who want workers and to the mobility of laborers between different occupations may cause frictional unemployment.

The expansion of art colleges and universities without helping in view the future emerging needs of the economy may lead to imbalances in the labour market. Today, in Pakistan, there’s an alarming surplus of university graduates and postgraduates.

Unemployment and underemployment are the most serious economic problems of Pakistan. The lack of effective demand is one of the worse causes of unemployment and underemployment in Pakistan.

By stimulating consumption through redistribution tax policy, by stimulating private investment through pursuit of low interest policy or by stimulating public investment in the rural agriculture sector, in the small and cottage industries and household production, unemployment and underemployment can be brought down.

Rate of Unemployment %


·         The biggest reason of unemployment in Pakistan is concerned with the backwardness of agriculture sector. Agriculture is the biggest sector of our economy that contributes 20.9% to GDP and 44% people get jobs from this sector directly or indirectly. Unemployment in this sector is from two sides.
·         First is due to the adoption of latest machinery and capital intensive technology. Due to this, demand for labour has been decreased. Second is the backwardness of this sector. There is less availability of fertilisers, pesticides, quality and certified seeds, absence of land reforms and lack of agriculture education. Due to all these factors agriculture sector is not expanding and there is general and disguised unemployment.
·         Industrial sector is the second largest sector of our economy and contributes 19% to national income. This sector should employ a large number of labor. But due to backwardness it is employing a small number of people. Due to electricity breakdown already established industry is deteriorating, resulting in the prevailing unemployment ratio.
·         High cost and low quality are responsible for less demand for our agriculture and industrial items. Because of less demand of such kinds of goods both the domestic and international producers are losing their interest in production. That’s why people are becoming unemployed.
·         In Pakistan education system is defective. There is no educational planning. This system is producing the stuff, which is useless in technical fields of the country. There is lack of technical and vocational institutions. Public attitude towards education is wrong, they want to get their degrees in general and arts subjects. Nobody can set up his own business without technical education.
·         Millions of people in Pakistan are poor. Due to poverty people are overburdened with expenditures and their savings are very low. It is said that for the reasonable growth of economy saving rate should be at least 25% in any country, but in Pakistan it is only 13 to 14% which is very low. Low investment level is due to less savings, ultimately there is unemployment.
·         In Pakistan majority of the businessmen are less educated. They do not know how to run their businesses properly. So they become bankrupt. This factor generates unemployment on a massive level.
·         In Pakistan there is lack of every kind of planning. There is a huge difference between the demand and supply for labor. There is absence of such kind of planning to produce doctors, engineers, technical experts scientists etc, according to the need of different sectors of the economy.
·         Load shedding of electricity is disturbing economy, especially the industrial sector. Due to less availability and high rates of basic inputs like electricity, gas and oil etc, many industries have been closed.
·         In Pakistan, tax system is not satisfactory. Ratio of direct taxes is more than indirect taxes. Tax evasion is common. Due to less income from the taxes, government cannot start developmental projects. If there is no investment, then from where public would find jobs. On the other side if government takes step to increase indirect taxes, it would also affect investment and ultimately employment level.
·         Current international financial crisis is one of the biggest reason of unemployment in Pakistan and in the whole world. This crisis originated from the banking sector of USA, UK and some European countries and is now a global phenomena.
·         Pakistan’s population growth rate is 1.8% which is the highest in the region. Our resources are limited. Different sectors of economy are unable to provide jobs to the growing population. So there is unemployment.
·         Fiscal and monetary policies are also responsible for unemployment. In view of fiscal policy, Pakistan has fewer funds to invest in job providing projects. Every annual budget shows deficit. Through the monetary policy if the government increases the rate of interest, it discourages the investors from getting loans.
·         Political instability, bad law and order situation, army’s interference, bomb blasts, terrorism, inconsistent economic policies etc are the factors which are disturbing domestic and foreign investment. Pakistan investors are taking away their money to Dubai and other countries of the world.
·         Due to 9/11 incident, Gulf war and the baseless allegations of terrorism the image of Pakistan has been affected very badly at international level. So in the current scenario Pakistan has limited job opportunities in other countries of the world.
·         Craze for work only in government sector, instead of private sector and seasonal firms, industries are also responsible for unemployment.
·         Since 1947, Pakistani rulers got loans from IMF, World Bank and many other sources. Such loans were not utilised honestly. Current external debt of Pakistan is more than 50 billion dollar. Government has to allocate a big amount for the repayment of loans with interest. So due to less resources for developmental projects there is unemployment.

Concluding, I would like to suggest that with proper economic planning, consistent policies of government, better law and order situation, abolishing energy crisis, sincerity with Pakistan and by adopting the Islamic economic system we can not only tackle the issue of unemployment but every economic problem of our country as well.

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