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Unemployment in Pakistan
Unemployment in Pakistan
Unemployment in Pakistan
Unemployment
Unemployment is the state in which a person is without work,
available to work, and is currently seeking work.
As defined by the International Labor Organization, "unemployed
workers" are those who are currently not working but are willing
and able to work for pay, currently available to work, and have
actively searched for work.
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.
Types of Unemployment:
1. Frictional unemployment
2. Classical unemployment
3. Structural unemployment
4. Seasonal unemployment
5. Keynesian unemployment
6. Underemployed
refers to people who are working less than full-time hours but would
like to work longer
7. Long-term unemployed
are people who have been unemployed for longer than 12 months.
Unemployment in Pakistan:
Now we see that in Pakistan what is the situation of unemployment
and what are its economic and social impacts.
In Pakistan labor 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.
In Pakistan unemployment is of structural and cyclical nature.
According to Labor Force Survey 1996-97, the rate of open
unemployment was 6.1 percent and 5.4 percent as per Labor 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.
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
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Country Comparison:
Here is the comparison of Pakistan with its neighbor countries and
some of the developed countries.
Country Unemployment rate (%) Rank
Pakistan 6.5 113
Japan 4.1 133
UK 2.9 154
USA 4.8 126
India 7.8 94
Germany 7.1 105
Russia 6.6 111
China 4.2 131
Afghanistan 40 13
Iran 15 49
Costs of unemployment:
Unemployment undermines the economic and social stability of any
society. Societies which fail to provide gainful and secure
employment to their people invite political instability, social unrest
and economic insecurity. The link between unemployment and
crime has also been well established.
The socio-economic fall out of the high unemployment rate in
Pakistan is evident from the drastic increase in the crime wave.
Today robberies, dacoities and kidnapping for ransom have become
a fearsome fixture of life in the country. The resultant lack of civil
peace and the rule of the law undermine the very basis of all
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industrial, economic and trade activities in the country. The case for
sustainable development for employment can hardly be argued
more forcefully.
Economic impact
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.
Solution to Unemployment:
Suggestions
1) Govt. should make efforts to push economic growth process.
For this purpose Economic Revival Package should announce for the
revival of industries sector, to stimulate production and investment.
2) Govt. should seriously try to boost exports through broadening
the tax base and lowering tariffs.
3) Govt. should announce a package for the development of
agriculture sector.
4) Beside this a number of fiscal and monetary measures should
take to attract industrialists and particularly foreign investment.
5) More Technical and Vocational training facilities should be
provided. In this way unemployed people will get the chance to
enhance their skills and become able to earn reasonable income.
6) With a view to reduce unemployment; self-employment scheme
should be encouraged in true manners.
At an individual level, the solution to unemployment may be as
simple as getting a job, or getting more training.
Societies try a number of different measures to get as many people
as possible into work. However, attempts to reduce the level of
unemployment beyond the Natural rate of unemployment generally
fail, resulting only in less output and more inflation.
There are some theories as well which help the unemployment
remove or reduce, such as:
i. Philips Curve
It used to be largely believed that unemployment could be solved
using the Philips curve. This involves increasing inflation to reduce
unemployment by fooling workers into accepting jobs at a lower
rate than they would otherwise have done, due to the declining
value of money. But Philips curve only help to reduce
unemployment in short term.
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iv. Tax-related
Role of Government:
The government is trying to reduce the unemployment rate. Under
Prime Minister's Self Employment Scheme, different Banks and
Small Business Finance Corporations are extending loans to
unemployed youths and skilled professionals having diploma/degree
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Measurement of Unemployment:
Though many people care about the number of unemployed,
economists typically focus on the unemployment rate. This corrects
for the normal increase in the number of people employed due to
increases in population and increases in the labor force relative to
the population. The unemployment rate is expressed as a percent,
and calculated as follows:
As defined by the International Labor Organization, "unemployed
workers" are those who are currently not working but are willing
and able to work for pay, currently available to work, and have
actively searched for work.
Since not all unemployment may be "open" and counted by
government agencies, official statistics on unemployment may not
be accurate.
The ILO describes 4 different methods to calculate the
unemployment rate:
Labor Force Sample Surveys are the most preferred method
of unemployment rate calculation since they give the most
comprehensive results and enables calculation of
unemployment by different group categories such as race and
gender. This method is the most internationally comparable.
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Benefits of Unemployment:
Unemployment may have advantages as well as disadvantages for
the overall economy. Notably, it may help avert runaway inflation,
which negatively affects almost everyone in the affected economy
and has serious long-term economic costs. However the historic
assumption that full local employment must lead directly to local
inflation has been attenuated, as recently expanded international
trade has shown itself able to continue to supply low-priced goods
even as local employment rates rise closer to full employment.
The inflation-fighting benefits to the entire economy arising from a
presumed optimum level of unemployment has been studied
extensively. Before current levels of world trade were developed,
unemployment was demonstrated to reduce inflation, following the
Phillips curve, or to decelerate inflation, following the NAIRU/natural
rate of unemployment theory.
Beyond the benefits of controlled inflation, frictional unemployment
provides employers a larger applicant pool from which to select
employees better suited to the available jobs. The unemployment
needed for this purpose may be very small, however, since it is
relatively easy to seek a new job without losing one's current one.
And when more jobs are available for fewer workers (lower
unemployment), it may allow workers to find the jobs that better fit
their tastes, talents, and needs.
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Conclusion:
By curing unemployment, there would be prosperity as well as
peace in the country. Because if the people are employed, they are
better-off. Although Pakistan has succeeded to decrease the
unemployment rate as compared to the 80s and 90s but still the
unemployment rate in the country can be curtailed by taking
necessary steps mentioned earlier as suggestions.