TERM PAPER

UNEMP LOYME NT AND ITS

SIT UATIO N
IN
ASIA

Submitted to:
Sir Abdul Farooq

Submitted by:
Muzammil Shahid (10)

Ifzal Ahmed (09)

Hajra Fazal(29)

Adeel Abid(08)
(F005-BBA)
Date:
11, December 2006
 Contents

1. Introduction 3
1.1 Statement of problem 3
1.2 Objectives of Study 6
1.3 Methodology and source 7
1.4 Organization 7

2. Review of literature 8

3. Analysis of Data 23
3.1 Global Causes of Unemployment 23
3.2 Costs and effects of Unemployment
24
3.3 Situation of Unemployment in South Asia 26
3.4 Situation in Pakistan 29
3.5 Role of Pakistan Government 31

4. Suggestions and Conclusions 33

6. References 38

List of Illustrations
Table 1 27

Table 2 28

Table 3 30

Figure 1 27

Figure 2 38

Appendix A 36
Appendix B 37

2
1. Intr od uct io n

1.1 Statement of Problem

Major obstacles in the path of Economic Development and

Growth of the Underdeveloped countries, better to say

developing countries are: Poverty, Inflation, illiteracy,

Unemployment, Capital deficiency, Lack of saving and

investment, Low GDP growth rate, Unequal income distribution,

Political and economic Instability, and poor health,

transportation and sanitation facilities.

These are only the few obstacles out of long list of problematic

situations. Out of these we can say the most important or one of

the bases of many other problems is the problem of

Unemployment or Underemployment.

Lacking a job often means lacking social contact with fellow

employees, a purpose for many hours of the day, lack of self-

esteem, mental stress and illness, and of course, the inability to

pay bills and to purchase both necessities and luxuries. These

effects are especially serious for those with family obligations,

3
debts, and/or medical costs, where the availability of health

insurance is often linked to holding a job. Increasing

unemployment raises the crime rate, the suicide rate, and

encourages bad health. During the Great Depression,

unemployment rates exceeded 20% in many countries. Finally,

high unemployment implies low real Gross Domestic Product -

human resources are not being used as completely as possible

and are thus wasting opportunities to produce goods and

services. Mostly unemployment thus represents a profound form

of inefficiency.

In year 2005 labor force worldwide was mixed, with more people

in work than in 2004 but at the same time more unemployed

people than the year before.

At the end of 2005, 2.85 billion people aged 15 and older were in

work, up 1.5 per cent over the previous year, and up 16.5 percent

since 1995.

The last decade has witnessed a decline in the global

employment-to-population ratio, which is the share of the world’s

working-age population (aged 15 years and older) that is in work.

It stood at 61.4 in 2005, which is 1.4 percentage points lower

than ten years ago (Appendix A).

The decrease was stronger among young people (aged 15 to 24).

Within this group the global employment-to-population ratio

decreased from 51.7 in 1995 to 46.7 in 2005. Part of this is

explained by the increasing proportion of young people in

4
education. Among adults (aged 25 years and older) the global

employment-to-population ratio declined from 66.8 to 66.3

between 1995 and 2005. Examining the adult age range by sex

reveals different trends between women and men: while the

share of employed adult males fell by 1.3 percentage points to

80.8 per cent, the share of the adult female population that was

in work grew. In 2005, 52.2 per cent of adult women were

employed, compared with 51.7 per cent in 1995. The gap in the

employment-to-population ratio between women and men thus

has narrowed but remains wide.

The world’s unemployment rate in 2005 stood at 6.3 per cent,

unchanged from the previous year and 0.3 percentage points

higher than a decade earlier (Appendix B). In total, nearly 191.8

million people were unemployed around the world in 2005, an

increase of 2.2 million since 2004 and 34.4 million since 1995.

Almost half of the unemployed people in the world are young

people, a troublesome figure given that youth make up only 25

per cent of the working age population. Young people are more

than three times as likely as adults to be unemployed.

South Asia’ s unemployment rate stayed at 4.7 per cent in 2005

and South-East Asia and the Pacific’s unemployment rate was 6.1

per cent. SOUTH Asia faces five major employment challenges.

The Employment Challenge One, South Asia is a hugely

populated region with 1.4 billion people, 60 per cent of whom are

5
in the working-age group. Two, labor force participation is only

about 66 per cent of the working-age population. Three,

employment growth rates are lower than both gross domestic

product (GDP) and labor force growth rates. Four, agriculture is

the predominant employer, although this sector has been

suffering from lack of investment and low productivity since the

Green Revolution during the 1960s. Five, one-third of South Asia

is in poverty; and, about half of the population — in four large

countries — is illiterate. Despite of the continuous economic

growth of world unemployment continue to be the serious

problem for all nations.

1.2 Objectives of the study

Major objectives of our study related to this term paper are to

discuss:

• Major causes of unemployment in Developing countries

• Major effects of unemployment in Developing countries

• Changes in employment and unemployment pattern around

the globe and with special importance to Asian countries.

I.e. Pakistan, India and Bangladesh.

• Role of Pakistan Government regarding unemployment

Term paper will also give suggestions to reduce and aid

unemployment in developing countries like India, Pakistan.

6
1.3 Methodology and Sources of Data

Most of the data is collected from internet for this term paper.

Statistics and figures are gathered from reliable sites of ILO

(International labor Organization), WB (World Bank), ADB (Asian

Development Bank) and SBP (State Bank of Pakistan).

Both absolute values and percentages are used to discuss

changing pattern of employment and unemployment. All the

statistics use in the paper are of 1995-onward up to 2005.

1.4 Organization

First introductory part of this term paper discuss about global

scenario of unemployment in detail with especial reference to

Situations in South Asia. Objectives of study are also given in

this part of paper. Then comes the review of literature which

include summarized articles of unemployment about situations in

world and also related to Asian developing countries. Then in the

third part, named as Analysis of Data, all the objectives of

causes, effects and role of governments regarding

unemployment are fulfilled.

7
2. R evie w o f lit er atur e

Katherine Hagen, ILO's Deputy Director-General,(1996) said, By

the year 2000, one-half of humanity will be living and working in

cities, with developing countries accounting for the major share

of the world's new urban population. These people will need jobs

if the new cities are to develop as centers of economic

opportunity and civilization rather than zones of inequality and

misery. Only the generation of productive employment can break

the vicious circle of urban poverty that is taking root in cities

worldwide.

In spite of the problems caused by rapid urbanization, cities are

rightly regarded as centers of productivity and engines of

economic growth. Urban centers make a disproportionate

contribution to Gross Domestic Product. This is also true for

many developing countries. For example, although Kenya is 23%

urban, Nigeria 35% and India 27%, the urban areas in all three

countries account for 70 % of GDP. In ILO's view cities are a

resource that needs to be developed continuously and with a

view to increasing human well-being and social justice.

Unemployment is not confined to developing-country cities.

Cities in developed countries have been hit hard by de-

industrialization, since most manufacturing was located in cities.

Over the last two decades the average drop in manufacturing

8
employment in G7 countries was 15 %. Among the larger EU

countries, the UK's share of manufacturing employment declined

by 43%, France's by 23% and Germany's by 14%. Most EU

countries are struggling with double-digit unemployment. The US

has low unemployment, but average real wages have stagnated

in the last 20 years, and high pockets of unemployment do exist

in some large U.S. cities.

International Labor Organization (ILO), (1996) says, one-third of

the world's inner-city population, approximately 400 million

people, is living in poverty, with lack of productive employment

as one of the most direct causes. By the year 2000, the ranks of

the urban poor are expected to have swelled to one billion

people. In absolute terms, Asia represents the largest

concentrations of urban poverty in the world. In the developing

world, African cities have the highest percentage of poverty, with

41 % of the urban population living below the poverty line.

The report, says that in both developed and developing countries,

the rise in urban joblessness causes urbanization of poverty.

The ILO estimates that there will be 1.2 billion new participants

to the world labor market by the year 2025. Most of the new jobs

will have to be created in cities. The share of non-agricultural

employment grew by 93 per cent in the last four decades, and

9
now accounts for 40 per cent of all employment in developing

countries.

Sunchild (1998) writes unemployment is good for big business,

and even small business. The higher the rate of unemployment

the more people there are looking for work, the more people

there are looking for work then the more likely they are to put up

with poor working conditions and poor pay, they more willing

they are to put up with poor conditions and pay the easier it is for

businesses to grow as they do not need to worry much about

worker strikes and unions. This exploitation of the workers,

allows businesses to save the money they should really be

paying out and use it to further there own goals. Any company

like McDonalds why bother to employ more young people when it

could buy a machine such as a Fry-Basketing Machine. The

machine although may cost more money cannot refuse to work,

does not call in sick, is not late, does not need breaks, can work

all day and all night, and is generally reliable. Finally once

company has paid for the machine it no longer needs to pay more

(other than electricity etc). This means that this money can be

used to further buy more machinery to replace more workers

until only few are left in place. The companies are aiming for the

highest output for the cheapest cost and not even governments

can make law that a certain number of employees must be

10
employed; rather they must beg the companies to do it and offer

them tax incentives, money which is later taken from the pocket

of the tax payers and workers. Capitalism favors this type of

system that leads to unemployment.

Syed M. Aslam (1999) writes that after fifty years, in Pakistan the

dream of Quaid-e-Azam still remains to be materialized as the

successive governments failed to exploit the natural and human

resources wisely. The economy is in such a worsening state

which the country never experienced before. The biggest portion

of the budget today goes towards the payments of foreign debts.

Little is left for education, health and development. This has

taken a serious effect on the employment opportunities in the

country where finding a job at all levels is becoming harder by

everyday due to frequent lay-offs in the public and private sector.

There are many seekers but few jobs. In a society where ‘who

you know’ has replaced ‘what you know’ as the major criteria for

jobs, chances of employment are miserable due to massive

downsizing in the public sector. Tens of thousands of graduates

leaving the universities every year are finding it harder to find a

suitable employment. Unemployment weakens 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. Unemployment

11
issue has taken a global viewpoint. Many of the developed

countries became more protectionist raising new protective

barriers against imports, particularly the competitive products,

from the developing countries to further worsen an already bad

situation. The socio-economic fall out of the high unemployment

rate in Pakistan is evident from the drastic increase in the crime

wave. Today robberies, 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 weaken the very basis of all

industrial, economic and trade activities in the country.

Economic policy plays a vital role to help keep the unemployment

rate under check. According to a UN report, the East Asian

economies in the 1980s avoided stagnation and unemployment

did so because they got their domestic policies right by careful

borrowing, creative use of foreign exchange rates, promotion of

exports, and protection of food growers and restraint of nominal

wages. All these measures have combined to keep the growth of

employment in flat compared to overall economic growth.

Miss: Samina Khalil and Rao Noman Saleem (1999) from Applied

Economics Research Centre, finds that 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

12
emotions and family lives. 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. On the basis of the population of 142.87 millions with

Labor force participation rate of 27.46 percent, the total labor

force comes to 39.24 million. According to this about 2.4 million

person of labor force were estimated as unemployed in 1999.

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. In

Pakistan unemployment rate is increasing in both rural and urban

areas in absolute as well as in percentage terms. 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, 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.

13
Kerstin Marx (2000) reported that the fallout from the financial

crisis in Asia that began in mid-1997 has caused massive

unemployment throughout the region, according to a new United

Nations study. The economic disorder in Southeast and East Asia

emphasized the weakness of these once high growth and full

employment economies, where unemployment rates have

doubled and even tripled in the space of a few months. ILO

statistics revealed that more than 150 million workers in 1997

are unemployed out of a world labor force of about three billion

people. Additionally, about 25 to 30 percent of the employed

workers are underemployed. The economic crisis in Asia is

blamed for much of the setback to the world employment

situation. Between August 1997 and December 1998, rapid job

losses create unemployment rise in Indonesia from 4.3 million to

13.7 million people. In Thailand, the numbers exploded from 0.7

million in February 1997 to 1.9 million in December 1998. Even in

less severely effected economies, such as Hong Kong, China,

Malaysia and Singapore, there are now twice as many people

without work as before the crisis. Before the crisis, the

Southeast and East Asian countries often had been cited as

''models of the positive impact of globalization in raising rates of

economic growth and job creation."

Their macroeconomic policies of promoting labor-intensive

exports, trade liberalization and attracting foreign direct

investment had raised the living standards and reduced poverty

14
within the region, according to the UN report. The crisis has now

revealed that the rapid globalization of the world economy has

posed new challenges which have made the goal of maintaining

full employment a more complex undertaking.

Mr. Johann Van Rooyen (2001) writes about the cost and causes

of unemployment that as is the case also with so many other

socio-economic problems, the issue of unemployment is much

more complicated than it appears in the world’s surface. As no

country is free from its revenge but developing countries are

hardly hit by it. To the people of poor countries job means access

to the basic needs of life, self esteem, and to whatever in small

way contributing to the well being of the nation. Being

unemployed the person is liability on family instead of an asset

to the society. The physical and mental strain may push the

person to adopt illegal way of earning money. The unemployed

represents waste of the nation because goods and services

which could be produced by these unemployed now goes into

waste. It also increase the expenditure of the nation in the form

of social benefits and security provided to the effected people.

There is wide survey that unemployment in developing countries

is caused by structural factors while in developed countries as in

the past traditionally been associated with a downswing in the

national business cycle or a temporary slump in the world

15
economy. When referring to structural causes of unemployment

one has in mind distinctive socio-economic characteristic, which

by their very nature tend to reinforce low employment levels.

Unemployment caused from structural variables has greater

permanency while cyclical unemployment tends to fluctuate.

Structural causes of unemployment are more persuasive and

embedded in developing societies. The other causal effect

contributing to unemployment includes diverse factors such as

diminishing donor interest, perceived political instability, and

security risk, over-regulation; labor market inflexibility; and

irregular unstable industrial relations etc.

MOHAMMED SHEHZAD (2004). South Asia faces five major

employment challenges, says the recent report of the Mahbub ul

Haq Human Development Centre, South Asia 2003: the

Employment Challenge. One, South Asia is a hugely populated

region with 1.4 billion people, 60 per cent of whom are in the

working-age group. Two, labor force participation is only about

66 per cent of the working-age population. Three, employment

growth rates are lower than both GDP and labor force growth

rates. Four, agriculture is the predominant employer, although

this sector has been suffering from lack of investment and low

productivity since the Green Revolution during the 1960s. Five,

one-third of South Asia is in poverty; and, about half of the

16
population is illiterate. South Asia's labor market is

characterized by pervasive unemployment and

underemployment, especially among the youth and the educated;

working poor who do not get adequate wages to get out of

poverty; working children; and women who face discrimination

across the labor market, reflecting prevailing social attitudes.

UNEMPLOYMENT among the youth accounts for a major portion

of the total unemployment. During 1997, youth accounted for

70% of the total unemployed in Sri Lanka, 53% in India and 45 %

in Pakistan . The failure to find jobs appears to have led the

educated youth towards either inactivity or further involvement

in education. According to the 1998-1999 Labor Force Survey of

Pakistan, 20 % of the post-graduate degree holders were out of

the labor force. Almost 50% of female doctors and 35%of

graduates in different disciplines were reported to be out of the

labor force. The survey claims that the WTO failed to generate

employment in the region. South Asia's unemployment levels

have raised from 2.9 per cent in 1995 to 3.4 per cent in 2001.

Data from ADB show that unemployment has increased in

Pakistan, Bangladesh and the Maldives, while it has decreased

only in Sri Lanka during this period. The Economic Survey of

India shows that the unemployment rate increased from 5.99%in

93-4 to 7.32% in 99-2000. The employment challenge in South

Asia is highly discriminatory against women. Women's limited

access to employment opportunities is best reflected in the gap

17
between the unemployment rates of men and women 3.5 times

more unemployed then men in Pakistan.

Mahbub-ul-Haq Human Development Centre (2004) based in

Islamabad, presents a rather depressing picture of human

development in the region. It points out that the WTO

administration has adversely impacted south Asian workers,

particularly those in small-scale industrial and agricultural

enterprises. South Asia hopes of gaining from WTO rules in the

key areas of agriculture, textiles and services, believing that

greater market access and a more even-handed trading system

would allow them to use cheap labor to encourage exports, have

failed to materialize. Secondly, HDC highlights the presence of

severe gender discrimination in the job market, pointing out that

most women are concentrated in low-paying, low-productivity

jobs. HDC notes that adult literacy has raised, it adds that there

is a rise in the number of the educated unemployed, generating a

debate on the relevance of the educational system in various

countries. Probably the most intense recent example of this is

the high rate of farmer suicides across southern India, despite

its emergence as a south Asian leader in IT. Elaborating on this

inconsistency, the president of the Pakistan center, Khadija Haq,

remarks that, "India's data on nutrition is worrying. There has

been a higher level of hunger as reflected by data on under-

18
weight. India exports food grains now, yet nutritional data

reveals the high occurrence of hunger in the population." In

neighboring Pakistan, according to Haq, one-third of the

population -- that is, 50 million people -- live in acute poverty,

making poverty reduction a main concern for the country. In

contrast, the troubled island nation of Sri Lanka provides a

positive difference, standing out as a model of human

development in south Asia. Says Haq, "The two main reasons of

Sri Lanka's success is achieving a very low level of population

growth and a high level of human development that is at equality

with the developed world." it achieved this miracle explains

senior analyst Dr Ketheswaran Loganathan, working with Sri-

Lankan research body, "The high literacy rate among women and

increase in women's participation in the job market especially in

the private sector has delayed the marriage age for women."

This primary factor, he says has given a boost to family planning

here, elaborating that, “economic pressure and the decline of the

extended family, this has forced couples to restrict the number

of children to one or two."

ILO Director-General Mr. Somavia (2005), reports that there is

need for development of comprehensive strategies aimed at

giving young people a chance to maximize their productive

potential through decent employment, as well as for an increase

19
of international aid for the most helpless youth in order to bring

them back into the fold of a civil society. It is recognized within

the UN as well as other international organizations and

governments that only through decent employment opportunities

can young people get the chance to work them out of poverty.

Sarid (2006) reports that the number of young unemployed

increased from 74 million to 85 million over the past ten years,

there were more than 300 million youth who were living below

the US $2 per day poverty line, notes a report by ILO. The highest

unemployment rate was observed In the Middle East and North

Africa: 25.7 %. In Sub-Saharan Africa 18.1 %; South East Asia and

the Pacific 15.8 per cent. The European Union prides itself with

13.1 per cent and East Asia with only 7.8% (officially). It is

important to note that in the developing regions, such as South

Asia, young women face disproportionate challenges in the labor

market. This is mainly due to cultural traditions, lack of work

opportunities, and a tendency of labor markets to drop young

women more rapidly than men when fewer job opportunities are

available. There is also a harsh increase in the number of young

people who are neither in employment nor in education, in

Central and Eastern Europe 34 percent of youth falls in this

category. In sub-Saharan Africa the rate was 27 percent, while in

20
Central and South America it was 21 percent. In the developed

countries, on the other hand, that number was only 13 percent.

International labor organization, ILO (2006) finds that

unemployment has reached to new heights despite of the healthy

economic growth. Unemployment is increasing at high rate

especially youth are mostly effected by this. ILO says that the

rapid increase in the GDP of the most of the economies could not

turn that economic growth into job creation and increasing of the

wages. No doubt that world’s GDP growth is increased to 4.3%

but even this could not decrease the unemployment rate. This

shows that even economic growth is not sufficiently addressing

global employment needs and the world is facing global job

crises and deficit in well-mannered working which could not be

cure by itself. There were 191.8 million jobless people at the end

of 2005 an increase of 34 people million since 1995(Appendix

B).The main problem is that more than half of the world’s

unemployed is youth while youth makes up 25% of the working

age population. The report says that only in service sector the

employment opportunities increased with one exception i.e.

Middle East and Africa. It says that if service sector continued to

grow on like this it will soon overtake agriculture sector in

providing employment opportunities.

21
Mr. Somavia, ILO (2006) said, in many countries, agricultural

workers are leaving a life of rural poverty in the hope of finding

something better in the city but end up little or no better off iN

informal laboring jobs or petty trading.

Economic shocks as well as natural disasters recently also hit

those areas who are already poor. This report suggests concept

that poverty can only be reduced by the rout of more and better

job in the economy.

It is quite clear from these articles that unemployment always

remained a serious problem in the way of development of any

country and it also is affecting the overall world development

programs. The cost of this for a nation is not only the lost GDP

(output),and welfare expenses paid for the survival of

unemployed but also the increase in crime and antisocial

behavior which in turn badly effect industrial and trade activities

and create further more unemployment and poverty in the

society. Serious political and governmental attention is needed

to reduce its impact on the society. Suggestions are discussed in

next section of the paper.

22
3. A na l ysi s o f Da ta

3.1 Global causes of unemployment

Unemployment is not the result of any one cause. It makes its

appearance in a great variety of circumstances, some in

personal factors, some in economic changes, and some in

legislative and regulatory conditions. Throughout the year some

workers may appear in the labor market and then withdraw.

Students work during the summer and return to school in

September. Building and construction activities, logging and

lumbering, slaughtering and meat packing are very seasonal and

give rise to a considerable amount of temporary unemployment.

Similarly, industrial and technological changes may force

workers to readjust and relocate. Jobs, wages, and working

conditions always point the way.

Unemployment can be considered as phenomenon driven by

multiple causes. Unemployment might be attributed to, for

example, deficient aggregate demand, high population growth

rate, discriminations, illiteracy, technical progress, market

imperfections, utility maximising decisions of workers, individual

search behaviour, the rise and fall of industries, trade union

behaviour, seasonal nature of jobs etc., or combinations of these

factors. This makes clear that unemployment is an instance in

23
which more than one cause is involved in the production of the

phenomenon and that total unemployment is an intermixture of

effects of these singular causes.

Another important cause of unemployment is that it is good for

big business. The higher the rate of unemployment the more

people there are looking for work, the more people there are

looking for work then the more likely they are to put up with poor

working conditions and poor pay, they more willing they are to

put up with poor conditions and poor pay the easier it is for big

businesses to grow as they do not need to worry as much about

worker strikes and unions. This exploitation of the workers,

allows businesses to sack the money they should really be

paying out and use it to further there own goals.

Less opportunities for women to take part in labor force in Asian

countries is also contributing to increase the overall ratio of

unemployment.

So we can say that each type of unemployment can have

different and more than one causes but the need is to control

these situations.

3.2 Costs and effects of unemployment

24
Unemployment is potentially very damaging. Its knock-on effects

are far reaching, destroying the lives of countless individuals,

parents and children and severely affecting a country’s economy.

For the individual, unemployment can be psychologically

damaging, eroding a person’s self-esteem. Unemployment in the

family context will cause added stress. In many countries the

common scenario is that unemployment takes families in to the

poverty trap. In anxiety parents send their children out in search

for work. In most instances this leads to cheap labor, begging

and trading on the streets and even prostitution and criminal

activity. Without education these children are without hope of

finding a decent job in the future. This is how child labor birth

takes place. This cycle of deprivation continues through the

generations.

Unemployment damages 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.

A rise in unemployment will seriously damage a country’s

economy. Unemployment represents a terrible waste of national

resources. The goods and services which the unemployed might

have produced are lost for ever. With rise in unemployment GDP

gap between potential and actual GDP increases. What is more,

for the State that the cost of unemployment does not only

25
consist of the loss of potential income-derived from taxation, it

also includes the expenditure involved in social security benefits

and various forms of subsidization to assist in maintaining at

least a minimum level of human dignity for those affected.

Employment is also directly related to all industrial and trade

activities. These activities slow down when there is a high level

of unemployment but increases when it is low.

3.3 Situation of unemployment in Asian

countries

South Asia's labor market is characterized by constant

unemployment and underemployment, especially among the

youth and the educated; working poor who do not get sufficient

wages to get out of poverty; working children; and women who

face discrimination across the labor market, reflecting prevailing

social attitudes.

World Trade Organization (WTO) has failed to generate

employment in South Asian region. South Asia's unemployment

levels have raised from 2.9 per cent in 1995 to 3.4 per cent in

2001 (officially) and the annual employment growth rate has

come down during the second half of the 1990s as compared to

the first half.

26
Data from the Asian Development Bank (ADB) show that

unemployment has increased in Pakistan, Bangladesh and the

Maldives, while it has decreased only in Sri Lanka during this

period. Though the ADB data do not report India's unemployment

rates, the Economic Survey of India shows that the

unemployment rate increased from 5.99 per cent in 1993-4 to

7.32 per cent in 1999-2000.

Unemployment rates,
1999-2001 (%)
Countries Rates
Bangladesh 3.3
Bhutan 1.4
Maldives 2.0
India 7.3
Nepal 1.1
Pakistan 7.8
Sri Lanka 8.2
Table 1 .Source: ILO

9
8
7
6
5
Uem ploym ent rate
4
3
2
1
0
Bangladesh India Pakistan Sri Lanka Nepal

Figure 1

27
The figures reveal that in most South Asian countries the

employment situation has worsened in the post-WTO period.

Employment generation in South Asian countries has so far not

benefited much from the WTO.

Pakistan current unemployment rate in 2003 officially remained

same 7.8% but unofficial rate of unemployment is too high.

The employment challenge in South Asia is highly discriminatory

against women. Women's limited access to employment

opportunities is best reflected in the gap between the

unemployment rates of men and women, which shows women

are 3.5 times more likely than men to be unemployed in Pakistan.

Male & female unemployment in South Asian countries (%)

Countries Female Male F/M ratio
Bangladesh 2.3 2.7 0.9
Maldives 2.7 1.6 1.7
India 10 7 1.4
Nepal .7 1.5 0.5
Pakistan 14.9 4.2 3.5
Sri Lanka 16.2 7.1 2.3

28
Table 2. Source: ILO

15

10
fem ale unem ploym ent (%)
5 m ale unem ployment (%)

0
Pakistan India

Figure 2

Two-thirds of South Asian women are employed in agriculture or

agriculture-related activities. They work in various roles such as

agricultural laborers, managers of homesteads, and sometimes

even as landowners. However, they are not allowed equal

opportunities in this sector in access to credit and inputs and

face discrimination in wages.

3.4 Situation in Pakistan

Many changes have been made to define the meaning of labor

force and employment in Pakistan— The Population Census of

1951 defined the labor force as all persons of 12 years and above

who are self-supporting, partially self-supporting or seeking

works. In 1961, its definition was changed to include all those of

ten years and above who were working for profit or wages or

helping their family members. Not only the change lowered the

29
age but it also included the unpaid family members in the

employed. Today, Labor Surveys define employment as "all

persons of ten years of age and above who worked at least one

hour during the reference period [the year] and were either ‘paid

employees’ or ‘self employed." Based on this definition, the total

number of employed labor force in 1999 is estimated at 36.2

million. For instance, based on a population of 134.5 million

today and a participation rate of 28.7 per cent, the total labor

force in Pakistan comes to 38.6 million of which 36.2 million

were employed. This also shows that only 2.4 million persons

were unemployed in the country which reflected an affordable

unemployment rate of 6.1 per cent. In fact, unemployment is a

much more serious problem than the official statistics show. If

the unemployment rate of 6.1 per cent is correct, the

employment rate is an ideal 93.9 per cent. Those who know

Pakistan, and there are many, find this highly unpalatable.

Unemployment in Pakistan today is widespread at all levels. It

does not spare the highly qualified professionals any more be

they doctors, engineers and MBAs. It hurts the illiterates, non-

skilled, skilled, and educated and professionals alike. Most of the

jobs created and advertised are aimed at the highly qualified

professionals whose share in the total employment is just 3.6 per

cent. There are little or no vacancies advertised for the two

biggest occupational groups— skilled agricultural and fishery

workers whose share is 36.8 per cent and the elementary or

30
unskilled workers whose share is 22.9 per cent.

Emplo yed W or k F or ce by Major Occupa tional Gr oups

(1999)

Table 3 Source economic survey 1989-1999

Gr oup No . %a ge S har e
Legislators, senior officials and
3.1 m 8.6%
managers
Professionals 1.3 m 3.6%
Technicians and Associate
1m 2.8%
Professionals
Clerks 1.1 m 3%
Service Workers and Shop and Market
2.8 7.7%
Sales Workers
Skilled Agricultural and Fishery
13.3m 36.8%
Workers
Craft and Related Trade Workers 3.6 m 9.9%
Plant and Machine Operators and
1.7 m 4.7%
Assemblers
Unskilled 8.3 m 22.9%
Total 36.2 m 100%

3.4 Role of Pakistan Government

The government is trying to reduce the unemployment rate in

country.

‘Rozgar’ schemes were launched by the Prime Minister Benazir

Bhutto in 1989 and in 1994 and her predecessor Nawaz Sharif

launched Yellow Cab scheme in 1992. However these schemes

could not contribute a lot due to many reasons. One is the

complicated procedure especially intensive verification, which

31
created hurdles for a common man. The Yellow Cab scheme was

drifted by the elite class, which had their sources in the banks.

After taking the cars as taxi in their name, they converted them

into private cars and most of those deserved to get benefit from

this scheme could not do it due to lengthy procedures,

guarantees and collateral formalities.

Under Prime Minister's Self Employment Scheme in 1999,

different Banks and Small Business Finance Corporations

extended loans to unemployed youths and skilled professionals

with diploma/degree and business experience. Loans ranging

from Rs.10,000 to be Rs.500,000 for small business and from

Rs.500,000 to Rs.5,000,000 for small industries etc. Small

Business Finance Corporation played role in reducing

unemployment. Up to March 1999, the Small Business Finance

Corporation has sanctioned Rs.2,208.4 million, against

amounting to Rs.1,551.95 million have been disbursed to 9,383

persons.

The SBFC has generated employment for 28,149 persons under

the Prime Minister's Self-Employment Scheme up to March 31,

1999. A Small and Medium Enterprises Development (SMEDA) has

been setup for growth and development of self-employment

schemes in Pakistan

During the year 1998 about 104,000 persons have been sent

abroad for employment under Govt. overseas employment

schemes.

32
Pr esident Musha raf recently launched self-employment

scheme in collaboration with National Bank of Pakistan (NBP)

offers self employment opportunities especially to youngsters for

setting up small scale enterprises such as small fixed phone

PCO, mobile PCO, transport rickshaw (Qingqi), Qingqi for goods

delivery and small Utility Stores. It is for the poorest of the poor

and provides employment opportunities to the unemployed youth.

It aims to target about 2.5 million unemployed individuals in

three to five years through simplified financing by the NBP.

Unfortunately President ‘Rozgar’ scheme has the same

complicated procedure. Like the past such employment

schemes, this scheme also has the condition of two guarantee

witnesses who will testify certificates and viability of the loan

seeker as mandatory, which is a difficult task for a poor common

individual (male or female). The other option is to provide

evidence of applicant’s property. If someone has ownership of

property then he/she doesn’t need such a small amount in shape

of loan to start any little business. The scheme also has a

condition of two personal references as compulsory. One of the

major concerns is that a secondary school certificate is a

prerequisite for a candidate that means middle grade or illiterate

youth or unemployed people cannot benefit from this scheme at

all.

33
4. Suggestions and conclusions

The growing human poverty challenges faced by Pakistan need

to be addressed through integrated policies and approaches at

individual and collective levels. Efforts on the part of national

governments, supported by the international community, can be

complemented for this. Civil society can play its role through

capacity building to get rid of the root-causes of unemployment

and poverty. Though complicated phenomena, poverty can be

addressed through adoption of multidimensional approaches.

First of all, real data should be collected to project real state of

poverty instead of false figures. This data can help devise plans

and strategies to address the issues around growing poverty and

to reduce this to maximum possible levels as defined in the

Millennium Development Goals (MDGs).

Unemployment and poverty, both cannot be addressed though

such short-sighted and politically motivated apparent measures.

If we really want to do this then, we have to reform our financial

and administrative structures and have to change the mindset

tuning this in terms of the people’s security that includes their

food security, job security, personal security and security of

movement. If we continue with huge spending on debt servicing

and defense, we can hardly allocate sufficient budgetary

provisions to address the giants of growing poverty and

unemployment. We need to recognize potential of our people and

34
look for options and possibilities that can divert our huge

budgets from debt serving and defense to human development

and poverty eradication, and job creations.

To meet the challenge of unemployment, we need to concentrate

on resource mobilization for the social sector development to

create more opportunities for education for all children as

mandated in MDG-2 which demands to ensure children

everywhere to be able to complete a full course of primary

education. More over we need to invest in higher scientific and

technical education. In this way, Pakistan as a developing state

may produce sufficient technical skills to accelerate its

economic growth and to position itself to meet challenges of

globalization in the twenty-first century. By creating more jobs

we can reduce burden on single bread earners in families. But

the job creation should be on easy and real terms and not just

politically motivated whims and assumptions. If the authorities

want that the recently launched President’s ‘Rozgar’ scheme

should benefit the targeted unemployed, then they have to think

in real terms. We need to express political will at the highest

level to make this scheme successful.

Government should take the following steps:

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.

35
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 educate unemployment; self-

employment scheme should be encouraged in true manners.

APPENDIX A

36
Source: ILO, Global Employment Trends Model, 2005

Appendix B
37
Source: ILO, Global Employment Trends Model, 2005
2005 figures are preliminary estimate

References

38
Syed M. Aslam, UNEMPLOYMENT — A NIGHTMARE

Mohammad Shezad, Human Development in South Asia, The challenge of

unemployment

GLOBAL EMPLOYMENT TRENDS BRIEF, January 2006, ILO

Samina Khalil and Rao Noman Saleem, Applied Economics Research Centre
Unemployment Situation in Pakistan

2003 Human Development Report, Globalization Fuels Unemployment in South Asia

President’s employment scheme, Pakistan observer

Kerstin Marx, Asia: Crisis causes massive unemployment

Dr Johann Van Rooyen, The cost and causes of unemployment, ECONOMIST.

Sunchild, Why is there unemployment spreading the world

List of countries unemployment rate. www.wikipedia.com

Source: ILO survey.

Websites
www.ilo.org
www.pakistaneconomist.com
www.sarid.net
www.pakistanobserver.com
www.google.com
www.wikipedia.com

39