Political economy of youth bulge

1m jobs must be created annually, for which economy should grow 6%

ISLAMABAD:

The recent toppling of Sheikh Hasina Wajid in Bangladesh serves as a grim reminder that the grievances of the youth should be promptly addressed. Hasina's fall, notwithstanding the healthy economic growth during her 15 years in power, is especially relevant to countries like Pakistan facing a youth bulge.

According to the Population Census 2017, the country's young generation – aged between 15 and 29 years – accounts for 27.1% of its total population. Nearly 64% of the population is below the age of 30.

According to the Pakistan Labour Force Survey 2020-21, the size of the labour force is 71.76 million, with unemployment rate of 6.3%. Between 2020 and 2023, the population has increased from 220.48 million to 241.50 million. Therefore, we can safely say that the size of the workforce has surpassed 80 million.

This shows that Pakistan, the fifth most populated country, has one of the largest workforces in the world. The implications of this youth bulge are enormous. Close to one million jobs must be generated annually. For the economy to do so, it must register sustained growth of at least 6% a year.

Not only that, the country should resist falling into the trap of jobless growth, which happens when economic expansion doesn't lead to a proportionate increase in employment. This necessitates adequate human capital development to shore up employability of a gigantic young generation.

However, during the last 10 years (FY2015-24), the economy registered average annual growth of 3.6%. On two occasions, the economy contracted – 0.9% in FY20 and 0.2% in FY23. Likewise, on only two occasions, the growth rate exceeded 6% – 6.1% in FY18 and 6.2% in FY22.

The youth, aged 15-24, have the highest unemployment rate of 11.1%, followed by those in the age bracket of 25-34 years, for which the unemployment rate is 7.4%.

With a 37.4% share, agriculture with a narrow margin remains the largest sector providing jobs, followed by services (37.2% share) and industry (25.4%). Between 2009-10 and 2020-21, the average unemployment rate remained at 5.5%, according to the Pakistan Labour Force Survey 2020-21.

Now, we assess the relationship between economic growth and unemployment. For the latter, the most recent credible data is available for FY21.

Between FY10 and FY21, the average economic growth was 3.8%, far lower than the average unemployment rate of 5.5%. This shows that not only Pakistan's economy has grown at a slow pace, the growth has also not been accompanied by a proportionate increase in jobs. Thus, the country is facing the double whammy of low and jobless growth.

A major cause of low and jobless growth is the country's weird development pattern. At the stage of development at which the country currently is, the industry including manufacturing should have been the largest sector of the economy.

However, currently, it is the smallest sector, accounting for 18.2% of the total economic output compared with a 57.7% share of services and 24% of agriculture. Manufacturing, a part of the industry or the secondary sector, makes up only 11.9% of GDP.

The low share of manufacturing, which is labour intensive, is due to premature industrialisation, driven first by unilateral hefty cuts in import tariffs during the 1990s in the name of structural adjustment and later by the country's free trade agreements, particularly with China, which has been in force since 2007, thus exposing a weak domestic industry to increased foreign competition.

Hence, the share of industry in GDP, which was 22.2% on average during the 1990s, fell to 19.1% and 19.3% on average in the following two decades.

Likewise, the share of manufacturing in GDP fell from 15% on average during the 1990s to 12% during 2000-09 before marginally improving to 12.9% on average in the following decade.

During the last five years, on average, the share of manufacturing in GDP has been 11.9%. This weird development pattern, together with a high birth rate, has resulted in a large pool of unskilled as well as educated labour force struggling to find a job.

A precarious security situation and some misplaced priorities caused the bulk of the investment to be made in speculative and quick-yielding assets, such as stocks and real estate, at the expense of real sector investment. The manufacturing base has remained narrow with low value addition.

In recent years, high back-to-back fiscal deficits have made austerity a major target of every government. The main problem in being austere is that more than 75% of the public expenditure – debt servicing, defence and general administrative expenses – is autonomous, meaning that it has to be incurred regardless of the state of the economy.

The axe, therefore, always falls on discretionary spending, which mainly includes development expenditure, which not only puts the brakes on the pace of economic growth in the long run but also discourages job creation in the short run.

Not only are there a limited number of jobs, the manner in which vacancies are filled also comes under question. In the public sector, political connections play a considerable role in job allocation, leaving the otherwise qualified candidates high and dry.

It may be recalled that in Bangladesh the recent student movement was sparked by the lack of merit in filling government jobs.

The high youth unemployment rate has made our young generation susceptible to falling prey to captivating by dangerous narratives, which have held sway in recent decades.

While these narratives may differ with each other in some respects, their pith is the same: Every conflict is presented as a struggle between good and evil in which either one is on the side of the good or on the side of the evil. Once angels and demons have been identified, the latter must get the cane.

In any event, a disgruntled youth can easily be incited to take to violence, which will harm the economy and its capacity to generate jobs. What we need is a sustained increase in investment, particularly in labour-intensive sectors, to absorb the rising number of young men and women.

The writer is an Islamabad-based columnist