Unemployment Situation in Pakistan
By Samina Khalil and Rao Noman Saleem
Applied Economics Research Centre
July 05 - 11,1999
For the record
SAARC: UNIQUE FEATURE
Unemployment is a central problem because when unemployment is high, resources are wasted and people's incomes are depressed; during such periods, economic distress also spills over to affect people's emotions and family lives.
Now we see that in Pakistan what is the situation of unemployment and what are its economic and social impacts.
In Pakistan labour force include all persons who are of ten years and above, and during the period are without work, currently available for work and seeking for work. On the basis of the existing population of 142.87 millions with Labour force participation rate of 27.46 percent, the total labour force comes to 39.24 million. According to this about 2.4 million persons of labour force were estimated as unemployed in 1999, as construction and transport sectors have absorbed 11.2 percent, 6.8 percent and 5.7 percent, compared to 10.5 percent, 7.2 percent and 5.0 percent respectively in 1994-95.
First of all we see the Sectoral employed Labour force.
According to Labour Force Survey 1996-97, the rate of open unemployment was 6.1 percent and 5.4 percent as per Labour Force Survey of 1994-95. This indicates that rate of unemployment has increased between these two surveys by 0.7 percent officially but unofficially unemployment is much larger than this rate.
Often it is perceived that unemployment rate of rural areas is greater because in rural areas there are less chances of employment as compared to urban areas where there are more chances of employment due to more industries. So now we see the annual unemployed labour force by urban/rural areas since 1993 to 1999, which is given in table below:
It is obvious from the above table that in Pakistan unemployment rate is increasing in both rural and urban areas in absolute as well as in percentage terms. Unemployment rate in rural areas is greater as compared to Urban areas. Because of industries there are more chances of employment in Urban areas. In Rural areas businessmen are setting up industries due to which now rural people seek Manufacturing sector for employment . As in rural areas there is no proper source of earnings due to which unemployment rate is increasing. As agriculture sector is not absorbing them due to adaptation of mechanical instruments and bad conditions. Small scale industries are not working efficiently due to worse economic conditions. So Rural people are not finding proper source of earning. It is clear from Percentage distribution of employed persons by major industries division.
From Okun's law we know that for every 2% fall in GNP relative to potential GNP, the unemployment rate rises by 1% point. High unemployment is a symptom of waste — for during recessions, when unemployment is high, the economy is not producing up to high level. When economy is not producing sufficiently, we can say that we are unable to use our full resources for production purposes. Economy will not grow as fast as it can if become able to produce at high level.
However large the cost to economy of unemployment, a recounting of Rupees lost does not adequately convey the human, social and psychological toll that periods of persistent involuntary unemployment bring.
Although unemployment has plagued capitalism, the Industrial Revolution, understanding its causes and costs has been possible only with the rise of modern macroeconomic theory. It is apparent that recessions and the associated high unemployment are extremely costly to the economy.
Unemployment is classified into three categories (a) Frictional unemployment (workers who are simply moving between jobs (b) structural unemployment (workers who are in regions or...