Misery of the labour force

Watching the TV, one often sees ordinary Pakistanis narrating economic miseries with tears down their cheeks; bricklayers, gardeners and many more fail to cope with the intense conditions. There is little doubt that Pakistan is at the forefront of a challenging macroeconomic situation. The budget has been widely criticised for rubbing salt on the wounds of ordinary taxpayers, exploiting those already within the tax base rather than the government adopting drastic measures to increase the base itself. These structural flaws and the need to raise more money led to a sharp decline in real income, purchasing power and the labour market as households now come to terms with the harsh reality.

In a capitalist world, employee retention’s concept becomes alien when profits are called into question. With the macroeconomic outlook of the country presenting dilemmas for businesses, the stop-gap solution implemented by the majority is to curb losses by laying off employees. Amid negative growth, inflationary pressures and rising electricity costs, it is the employees who are sacrificed in the race to sustain. No wonder the unemployment rate (active job-seekers) was expected to be 5.6 million in 2023, which validates the IMF’s projection that Pakistan would have an unemployment rate of 8.5% in 2023.

According to a report by ILO, comparing with figures from 2019, pre-pandemic economy, in 2023, the country’s employment-to-population ratio is 47.6% i.e. 2% less than in 2019. Moreover, the “jobs gap” estimate has surged to 2.4 million in 2023, highlighting the lack of opportunities for job-seekers. For the government, a priority objective should be the protection of such job-seekers and the encouragement of individuals willing to work. Nearly 70% of the unemployed men are from rural areas; and taking inspiration from India’s ‘Mahatma Gandhi National Rural Employment Guarantee’, Pakistan should introduce a similar law. Why? In India, this law gives a legal guarantee of hundred-day wage employment in a fiscal year to adult members of a rural household willing to do unskilled manual work and demand jobs.

There is a constant need for job creation in Pakistan, being the fifth most populated country in the world, to ensure the masses are catered for. More and more students graduate, only to realise there’s a shortage of reasonable jobs and the companies that hire underpay the fresh employees. This ‘trap’ discourages people from entering the labour force, depicting a severe under-utilisation of resources in an already dilapidated economy. Furthermore, graduates soon realise that while they do have a paper that certifies their educational prowess, there’s a gap in their technical skills and their abilities, because of which they are often rejected or replaced by others when it comes to specialised vacancies.

Nevertheless, there would always be a devil’s advocate arguing that employees are not productive, and instinctively quote the labour productivity of Pakistan, comparing it with other nations. Indeed, Pakistan’s labour productivity between 1990 and 2018 has been 1.33%, while China’s is almost 4 times of that. This stark difference can be attributed to Pakistan’s failure to capitalise on globalisation and the growth it promises. Labour productivity increases with trade and the transition to high-productivity sectors. With labour mainly being agricultural, mining and transport, coupled with the absence of extensive trade, it’s meaningless to debate the low labour productivity rate.

There is a long way to go before households recover from the income shocks they experienced in recent years. When looking for answers, who would the ordinary citizen look towards when the bills are beyond their means and are stuck in a spiral of debt? At the end of the day, who is responsible for the labourers, unemployed and those struggling to make a living? With unemployment on the rise and households crippled with inflationary pressures and a fall in their real income, there are signs the country’s motive of inclusive growth will be nothing but an empty promise.