Pakistan unable to profit from youth bulge: Study

The number of people in the 15-49 years group and the total labour force are projected to nearly double by 2050.

KARACHI:

The youth is the future, politicians loudly proclaim at every rally. But do they have a plan to manage the ‘future’ – the burgeoning group of young people who will be joining the workforce?

A new paper for Oxford Analytica, authored by political economist Dr S Akbar Zaidi, looks at the demographic transition in Pakistan. The paper notes that this had led to two different views: “one celebrates the emergence of a young and dynamic population as a harbinger of prosperity; the other expects that an inability to house, feed and provide jobs to the youth will pave the way for instability, possibly even anarchy.”

Dr Zaidi says that a young population is considered a harbinger of prosperity because it can be put to better use with its education and skills and contribute to the economy and society.

However, he doesn’t subscribe to the theory that unemployment will lead to social upheaval in Pakistan, or that it leads to ‘Talibanisation’.

“There continues to be an extraordinary ability of the economy to absorb people into the workforce,” he told The Express Tribune, especially because of the informal economy. The paper also notes that while unemployment is officially an estimated 5.6%, the figure is unreliable and the presence of a large informal economy – including in the agricultural and services sectors - conceals actual unemployment figures.

On the other hand, the paper states, “Given that developed-world countries have rapidly declining fertility rates and ageing populations, Pakistan’s growing ‘talent pool’ is expected to play a larger role in satisfying global demand for workers in the 21st century and contribute to the well-being of Pakistan as well as other parts of the world.”

Dr Zaidi cited the example of China, which has a problem now because of the low numbers of young people which is the outcome of the country’s one-child policy. “In this case, India is much better off,” he said.

He does stress the need for enhancing skills. Brain drain exists – as DrZaidi highlighted, it has since the 1970s - and could be further fuelled by the lack of opportunities for highly skilled graduates, political instability and the state of security. The only way it would be reversed is if Pakistan is seen as a “land of opportunity” as China is.

Even though there is rising demand for quality education in Pakistan, related job expectations would be difficult to meet by the economy. The paper notes, however, that the need for more schools is an investor opportunity, and several business groups in Karachi are currently catching on to this by backing business schools.

But do policy makers care? Dr Zaidi, who works for Oxford Analytica, a global analysis and advisory firm, remarked that the government “doesn’t have a plan, because they don’t have a plan for anything” when it comes to managing population and the demographic transition.

According to the paper, the number of people in the young age group (15-49 years) and the total labour force are projected to nearly double by 2050. This requires a growth strategy that focuses on creating employment and have high employment elasticity, but the paper notes that economy and policy-making are currently unable to profit off this ‘dividend’ of demographic transition.

China, which has a problem now because of the low numbers of young people which is the outcome of the country’s one-child policy. “In this case, India is much better off,” he said.

He does stress the need for enhancing skills. Brain drain exists – as DrZaidi highlighted, it has since the 1970s - and could be further fuelled by the lack of opportunities for highly skilled graduates, political instability and the state of security. The only way it would be reversed is if Pakistan is seen as a “land of opportunity” as China is.

Even though there is rising demand for quality education in Pakistan, related job expectations would be difficult to meet by the economy. The paper notes, however, that the need for more schools is an investor opportunity, and several business groups in Karachi are currently catching on to this by backing business schools.

A note of caution

Economics professor at the University of Hawai’i and a senior fellow at the East-West Center Andrew Mason sheds further light on the perception that an increase in the labour force is favourably linked to the economy. He has co-authored an Asian Development Bank 2011 study called ‘Population, Wealth, and Economic Growth in the Asia and Pacific Region’.

“There is mounting evidence that countries have experienced a demographic dividendwhen fertility declines because the share in the working ages increases,” he said. “The basic idea is simple there are many more workers per person and, hence, higher standards of living can be achieved.” But some people are misinterpreting this, saying that rapid growth in the working age population is highly favourable for economic development and leaving off the critical element - the decline in the high burden of the large dependent child population.

The ADB study highlights that the support ratio in Pakistan (effective number of workers per effective consumer) will grow at about 0.6% per year. “This is the amount added to per capita income by changes in population age structure due to the ongoing decline in fertility rates in Pakistan,” he said.

“There are some important secondary effects that could perhaps double this effect. So I would say that fertility decline in Pakistan should have favourable effects on the economy over the coming decades.  More rapid fertility decline would push these benefits higher and help with some of the problems that arise with such a large and growing population - congestion, environmental stress.”

Published in The Express Tribune, August 19^th, 2012.