Research Topic.

Unemployment
Research Question;
To find out the root cause of increasing trend of unemployment in Pakistan?
Answer;
Objectives
Find out the root cause of increasing unemployment in Pakistan?
To explore the factors of increasing unemployment in Pakistan?
Introduction
What is Unemployment?
The concept of unemployment has changed considerably over time. At various times in
the past, for example, it has been considered inappropriate to regard women, children or
the elderly as unemployed. Questions still arise today as to just who are to be regarded as
such. Does it include those who are working part-time but would prefer full-time? Is, for
example, a brain surgeon only able to find work as a laborer a seasonal worker between
jobs, or a young person opting to continue at school due to the unavailability of paid
work, unemployed? Unemployment is a social scourge. It is wasteful and impoverishing
and generates discontent, frustration and resentment. Ultimately, if not checked and
reversed, it can lead to the disintegration or destruction of the society itself.
Unemployment is the mother of countless evils. It is also one of the major problems of
the world.
Definition of unemployment:
Unemployment as defined as the persons who are ten years of age and above and are
(a) without work (b) are in not paid employment and (c) seeking work are
unemployed. According to this definition about 3.31 million people are estimated to
be unemployed.
Unemployment is a key measure of economic health. It is a major factor in determining
how healthy an economy is; if the economy maximized efficiency, everyone would be
employed at some wage. An individual unemployed is both unproductive and a drain on
societys resources. However, while unemployment seems a basic statistic the number
without jobs divided by those with jobs the issue is anything but. Unemployment is a
powerful statistic that shapes government policy and personal decisions. The government
keeps a close eye on the unemployment rate. Not only does unemployment indicate that

the economy isnt operating at peak efficiency, but politicians have noticed that high
unemployment correlates with losing elections. The Federal Reserve believes that
unemployment below a certain threshold they refer to as the natural rate of
unemployment leads to inflation, reflecting an observation by the economist A. W.
Philips correlating unemployment to inflation during the 1960s. The Bureau of Labor
Statistics is the US agency that monitors and reports on unemployment and other labor
statistics. In 2006, the average unemployment rate was 4.6%1. This number only includes
a subset of the total US population: the currently unemployed people who are willing and
able to work. This subset of the population excludes children and infants, people in the
prison system, and people who choose, for various reasons, not to work. Choosing to
measure unemployment this way assumes that a classical free
Unemployment Rate in Pakistan decreased to 6 percent in the second quarter of 2013
from 6.30 percent in the first quarter of 2013.Unemployment is one of the biggest
problems of Pakistan. That person is unemployed who has ability to do work and is
willing to do work but is unable to get job opportunity. In the current situation more than
30 lakh people are unemployed in Pakistan and unemployment ratio is more than
12%.Unemployment is an economic term. It means the percentage of labors force without
job. It is a global problem. Unemployment is on its peak in Pakistan. According to the
recent statistics, approximately 5.95 percent of labors force is unemployed in Pakistan. It
is increasing day by day.
A person is unemployed if he or she did not worked during the preceding week but
made some effort to find working the past four weeks
The ratio of unemployment is increasing rapidly due to lack of sources and when
unemployment takes place so many crimes are automatically be created. Pakistan the
Asian country has plenty of problems in these days and unemployment is one of those.
Unemployment is caused numerous problems for its people. Pakistan has countless
natural resources but problem is that resources are being wasted since the independence
of Pakistan in 1947. You may find many graduated masters IT experts, engineers and
doctors wondering about for job opportunities due to bad employment system. The
people of Pakistan are considered highly talented and hardworking in the world and there
is no value of talent in Pakistan therefore it is the reason many of engineers, doctors,
Scientifics, technicians and accountants travel in foreign countries for earn their
livelihood. Unemployment has become a leading world problem after the economic
slowdown affected almost the entire world. Pakistan is a now going through its 64th year
of independence but still the public is listening to the lame promises of the politicians, as
the people of Pakistan are still suffering from a major population of poor, ignorant and
unemployed residents. The problem of unemployment is becoming acute by every
passing day. In Asian countries unemployment is at its highest peak.
In Pakistan due to gigantic rise in population, individual finances have been disturbed a
lot. This is because of rising unemployment. The major causes of unemployment in
Pakistan are: Firstly, joblessness in Pakistan is worsening. Law and order situation, owing
to this negative social phenomenon, foreign direct investment is sliding down to bottom.
As new jobs are not generating while the job seekers are raising continuously in the

country. Secondly, Agriculture is account for maximum job provision in the country.
Agriculture sector is facing severe challenges of water shortage, climate changes and
technological backwardness in recent years. About 62% of Pakistan population is living
in rural areas, and is directly or indirectly linked with agriculture for their livelihood.
Thirdly, Industry is also a heaven for educated as well as semi-educated labors force in
the country. Pakistan industry is short listing its labors because of gradual decrease in
demand as well as acute energy shortage. Energy shortfall has cause severe damage to
productive capacity. There is a severe type of competition in the open market. Those who
are well competent and active enough stand a great chance of selection up to the standard
than expected over. The copy culture has also influenced the educational system. It is
backward and deficit and youths are not trained full well to come to the market demands.
The ongoing educational system is divided in such a way that it classes between the
people in accordance with the college and universities are infested with political parties.
All of that creates confusion, rifts and tumbles between the students. The political parties
members are found involved in undesirable criminal activities in educational institutions.
Therefore students after getting degrees, lag behind and its the reason they remain
unemployed.
Effects of unemployment are social not just economic. Frequently crime rates rise as
people are unable to meet their need through work. Divorce rates often rise because
people cannot solve their financial problems. The rate of homelessness rises, as do the
rates for mental and physical illness. Homes are foreclosed and hopeless that can result
from losing ones income cannot be overstated. We have heard many times that a head of
household has murdered his entire family as a result of overwhelming economic pressure.
It is all due to financial disaster that pushed them over the edge. Loss of income and the
resulting hardships to the individual and his or her family is the most obvious and direct
effect of unemployment. In addition the unemployed person also suffers from lose of
self-respect and dignity in the society. Education is a key to change and progress, both
change and progress goes hand in hand, no change no progress. Therefore educational
system should be stabilized and changed to prepare the youths according to true values of
life and especially to the market demands. All the youths belonging to elites or non-elites
ought to be prepared in government colleges and universities which will lead the system
to reform. Moreover, industrialization should be developed in country that would lead to
employment opportunities for the youths by contributing stability to the country.

The problem of unemployment is becoming more and more acute. The only way to
diminish the intensity of unemployment is to encourage the youth towards the welfare of
the county. The education system must be reformed up to the level of an underdeveloped
country. Agriculturists must be encouraged by the government. We must have a clean and
corruption free government. More and more industries must be built to provide much
opportunity to the youth. Pakistan is a poor country in regard of industrialization.
Therefore industrialization must be given top priority. Youths activities and energies
should be directed in a useful channel for the nations prosperity. Unemployment is an

alarming tone for the survival of the country. Solution to this problem is a must to
wriggle the new generation out of the sense of deprivation.
Classification Of unemployment:
1. Rural unemployment
2. Urban unemployment.
Causes of Unemployment:
There are number of causes of unemployment founding in Pakistan. These causes are
disturbed the economy of our nation. It pollutes the society and wrecks the political fabric
the country. It turns the law abiding and honest man into criminals and dacoits. A long
spell of poverty and unemployment is a great menace to the state. In Pakistan we find
increasing unemployment in different fields, such are as:
1.
Backwardness of agriculture sector.
2.
Backwardness of Industrial sector.
3.
High cost and low quality.
4.
Lack of education.
5.
Less savings low Investment.
6.
Lack of planning.
7.
Lack of Resources.
8.
Unsatisfactory Tax system.
9.
International Financial crisis.
10. Overpopulation.
11. Un Established Fiscal and Monetary Policies
12. Political Instability.
13. International Terrorism.
14. Repayment of External Debt.
15. Foreign Investors.
16. Economic Problem.
17. Inflation.
18. Defective System of Education.

1. Backwardness of agriculture sector:

The biggest reason of unemployment in Pakistan is concerned with the backwardness of
agriculture sector. Agriculture is the biggest sector of our economy that contributes 20.9%
to GDP and 44% people get jobs from this sector directly or indirectly. Unemployment in
this
sector
is
from
two
sides.
First is due to the adoption of latest machinery and capital intensive technology. Due to
this, demand for labor has been decreased. Second is the backwardness of this sector.
There is less availability of fertilizers, pesticides, and quality seeds, absence of land
reforms and lack of agriculture education. Due to all these factors agriculture sector is not
expanding and there is general and disguised unemployment.

2. Backwardness of Industrial sector:

Industrial sector is the second largest sector of our economy and contributes 19% to
national income. This sector should employ a large number of labor. But due to
backwardness it is employing a small number of people. Due to electricity breakdown
already established industry is deteriorating, resulting in the prevailing unemployment
ratio.

3. High cost and low quality.

High cost and low quality are responsible for less demand for our agriculture and
industrial items. Because of less demand of such kinds of goods both the domestic and
international producers are losing their interest in production. Thats why people are
becoming unemployed.

4. Lack of Education :
Literacy Rate 57 %
In Pakistan education system is defective. OUR literacy rate is said to be 57 percent.
There is no educational planning. This system is producing the stuff, which is useless in
technical fields of the country. There is lack of technical and vocational institutions.
Public attitude towards education is wrong, they want to get their degrees in general and
arts subjects. Nobody can set up his own business without technical education. In
Pakistan majority of the businessmen are less educated. They do not know how to run
their businesses properly. So they become bank deplorably low rate of literacy and
deterioration in standard of education in the educational institutions contributed much in
increasing unemployment rate. Our educational system is also responsible for increasing
unemployment rate among the educated youth. Education system is divided into different
categories. Students studying in government institutions will be less aware about the new
technologies, ideas for surviving in this competitive world and unemployment rate is
higher among such students. Besides education the attitude of our youth towards the
choice of a career is unrealistic and unproductive. Rapid mechanization and computer
technology also causing unemployment.
The education system in Pakistan has been really poor since the creation of Pakistan.
Unfortunately any government since independence didnt take especial steps to make the
education system good. Education system in Pakistan is unbalanced. It has been seen
even talented students left study due to injustice of system. You will see many technical
educational colleges and private technical institutions are being found which are only
selling degrees because technical education which is being given in these institutions has
no value, therefore people are wondering about for jobs due to lack of experience and
skills.

5. Less savings low Investment.

Millions of people in Pakistan are poor. Due to poverty people are overburdened with
expenditures and their savings are very low. It is said that for the reasonable growth of

economy saving rate should be at least 25% in any country, but in Pakistan it is only 13 to
14% which is very low. Low investment level is due to less savings, ultimately there is
unemployment.

6. Lack of planning.
In Pakistan there is lack of every kind of planning. There is a huge difference between the
demand and supply for labor. There is absence of such kind of planning to produce
doctors, engineers, technical experts scientists etc., according to the need of different
sectors of the economy.

7. Lack of resources.
Load shedding of electricity is disturbing economy, especially the industrial sector. Due
to less availability and high rates of basic inputs like electricity, gas and oil etc., many
industries have been closed. Could you believe country with plenty of natural resources
and atomic power is lacking of energy crisis? There are many sources of producing of
energy in Pakistan but due to lack of proper planning and efforts Pakistan is having
problem of energy crisis. The government of Pakistan is unable to provide electricity to
residential areas in Pakistan than how can energy or electricity can be provided to
factories and industries. Therefore factories and industries that are required energy are
transferring their business in other Asian countries like Bangladesh, India and as well as
Sri Lanka. As of this result a huge number of labors are becoming the victims of
unemployment.

8. Unsatisfactory Tax system.

In Pakistan, tax system is not satisfactory. Ratio of direct taxes is more than indirect
taxes. Tax evasion is common. Due to less income from the taxes, government cannot
start developmental projects. If there is no investment, then from where public would find
jobs. On the other side if government takes step to increase indirect taxes, it would also
affect investment and ultimately employment level.

9. International Financial crisis.

Current international financial crisis is one of the biggest reasons of unemployment in
Pakistan and in the whole world. This crisis originated from the banking sector of USA,
UK and some European countries and is now a global phenomena

10. Overpopulation.
Population growth rate: 1.8%
Pakistans population growth rate is 1.8% which is the highest in the region. Our
resources are limited. The total population in Pakistan was last recorded at 178.9 million
people in 2012.

Different sectors of economy are unable to provide jobs to the growing population. So
there is unemployment. Rapid growth in the population is the main factor which is
worsening the situation, but Pakistan is one of the most populated countries of the world
with annual growth rate being nearly 3 percent. It means that about 1 million workers are
added yearly to the existing labors force which calls for creating job opportunities.
Increase in population contributed much in rising unemployment rate in Pakistan and if
the population growth keep on increase one of the major problems regarding
unemployment in Pakistan is uncontrolled growth of population. The population of
Pakistan is increasing at very high rate this time. According to the statistical the
population of Pakistan is increasing at the rate of 2.2%. There are plenty of factors
responsible for over population such as early marriages, illiteracy, desires for sons, lack
of awareness etc. As we all know that the education system of Pakistan is not up to the
mark therefore increasing in population means bring more uneducated person into the
field of labor. Government or any other company cannot provide jobs or work places to
this huge amount of uneducated people at time easing with the same ratio than it will
create more problems.

11. Unestablished Fiscal and Monetary policies.

Fiscal and monetary policies are also responsible for unemployment. In view of fiscal
policy, Pakistan has less funds to invest in job providing projects. Every annual budget
shows deficit. Through the monetary policy if the government increases the rate of
interest, it discourages the investors from getting loans.

12. Political Instability.

Political instability, bad law and order situation, armys interference, bomb blasts,
terrorism, inconsistent economic policies etc. are the factors which are disturbing
domestic and foreign investment. Pakistan investors are taking away their money to
Dubai and other countries of the world. Due to these problems lack of investment cause
lack of opportunities so its have a positive relation with unemployment?

13. International Terrorism.

Due to 9/11 incident, Gulf war and the baseless allegations of terrorism the image of
Pakistan has been affected very badly at international level. So in the current scenario
Pakistan has limited job opportunities in other countries of the world. Afghans refugee to
Pakistan is the additional problem of unemployment in Pakistan. When American army
attacked on Afghanistan in 2001 about 13 years ago and due to this plenty of Afghans
migrated to Pakistan for making them save till the betterment situation of their country

but the situation in Afghanistan is still critical. The migrated people caused labor markets
as they are ready to work for fewer wages. Pakistan not utilize these money on economy
so its lead to unemployment.

14. Repayment of External Debt.

Since 1947, Pakistani rulers got loans from IMF, World Bank and many other sources.
Such loans were not utilized honestly. Current external debt of Pakistan is more than 50
billion dollar. Government has to allocate a big amount for the repayment of loans with
interest. So due to fewer resources for developmental projects there is unemployment.

15. Lack of Foreign Investors.

The FDI in Pakistan has been decreased in the last few years due to unstable
environment. FDI inflows to Pakistan can be explained in terms of its size and percentage
of gross domestic product (GDP).
Due to inconsistent investment policies, the flow of FDI was insignificant until 1991;
however, it steadily increased in the post-liberalization period. Actual inflows of FDI to
Pakistan have increased from $119.6 million in 1975-79 to $3299.8 million in 1995-99
and from $485 million in 2001-02 to $5,152.80 million in 2007 -08.
FDI has showed a declining trend since 2007-08, which is due to the lack of enabling
environment for investment in the country in recent years.
The document indicates that Pakistan secured $3.52 billion in FDI in 2005-2006. FDI
grew to $5.14 billion in 2006-2007, then $5.41 billion in 2007-2008. However, with the
decline in economic growth and the prevalence of terrorism, its FDI level dropped to
$3.72 billion in 2008-2009.
As terror attacks intensified, investment continued to shrink, dropping to $1.72 billion in
2009-2010. Pakistans foreign direct investment (FDI) dropped by 44.7% in the first ten
months of fiscal year 2009-2010 and fell to $239.4 million during July-October period of
2011-12.
The reasons of declining foreign direct investment in Pakistan is due to bad planning and
government policies. The low rate of GDP, political instability, worse law and order
situation and energy crises are the major causes of low FDI. The worsening security
problem has scared away investors. FDI cannot be encouraged in a worsening law and
order situation. The situation wont improve until the government remedies the security
and energy crises. Its hard to lure investment unless and until investors are given
lucrative incentives for preferring Pakistan over other countries.

16. Economic Problem.

1. Economy of Pakistan is in serious crises.
2. Political instability is the major cause along with many others.
3. In Pakistan, the system of taxes does not work well.
4. Corruption and bribery of the government officials hinder smooth functioning.
5. Pakistan is rich in natural resources but poor in managing and utilizing these.
6. Foreign exchange has always been a major problem of Pakistan.
7. The population growth rate adds to the economic difficulties of the country.
8. Poor literacy rate and lack of skilled workers are also the major unemployment
problem of Pakistan.
9. Misuse of funds adds to the burden.
10. Progress cannot be made in the absence of a strong political system.
The economy of Pakistan is undergoing serious and far reaching changes. The economic
sanctions because of nuclear explosions, decrease in exports and political instability are
the major factors of unemployment and responsible for sluggish Pakistan economy. These
all factors lead to growing unemployment situation .The overall situation is not rosy.
International economic scenario is also under recession. So it is very difficult for a nonelected government to control the situation. It is not possible for any government to start
or even continue projects of development without capital. Taxes of Govt. are always
major portion of national income, but in Pakistan the system of recovery is not
functioning fruitfully. Business community prefers to bribe a few thousand than to pay
the official tax year by year. We can say that corruption is one of the major problems that
are eating up over economy so lack of money cause unemployment .The absence of
check and balance is resulting in destruction.

17. Inflation.
Inflation rate: 8.53%
The inflation rate in Pakistan was recorded at 8.53 percent in March of 2014.The
GDP growth has a significant dampening effect on inflation. This sector recorded
growth of 2.5 per cent per annum during last five years which is even lower than3.0
per cent population growth rate. The effect of poor agriculture growth is also

evident from the fact that 'food group (weight 49.35 per cent), in CPI recorded 107
per cent inflation from 1990-91 to May, 1997 as compared with overall inflation of
97.57 percent and non- food inflation of 88.0 per cent during the same period.
Prices, however, increased soon after the government's announcement. Inflation in
Pakistan is claimed to be a monetary phenomenon. Pakistan saw a very high rate of
monetary growth between 1990-91 and 1995-96, averaging 18.8 per cent per annum.
Inflationary Gap=monetary growth-(real GDP growth +price inflation) The
National Credit Consultative Council (NCCC) has approved a monetary growth
rate figure of 14 per cent for 1997-98.Increases in the world price of imports in the
world market and a 40 percent devaluation / depreciation in the Pakistan rupee
from January 1991 to June 1997 fuelled inflation to unmanageable levels. The tax to
GDP ratio in Pakistan is only 13 to 14 per cent, leaving the government short of
funds to run the machinery of the government. The government has to borrow to
service the existing debt. The government has to compete with the private sector and
offer attractive rates of return on its securities.
Besides unemployment; inflation is another macroeconomic problem which hurts both
economic and social indicators in any country. Pakistan economy has also come across
with this macroeconomic problem. The inflation rate was 23.07 percent in the year 1973;
it increased to 26.66 percent in the year 1974, then it started decreasing and became 11.94
percent in the year 1980, and afterwards it reached to 7.84 percent in the year 1989. After
the year 1989; the inflation rate turned to be 2.91 percent in the year 2003 and it became
13.88 percent in the year 2010. The inflation rate changed each year and followed both
upward and downward trend. It could be seen from the figure no. 2 for a case of Pakistan.
Real Per Capita GDP is used as proxy for economic growth in this study. It is generally
perceived that when economic growth takes place in the country; it increases the pace of
economic activity in the country, due to which, employment increases. The increase in
employment will enhance the purchasing power of the people in the country and as result
to it, consumption increases which leads to raise aggregate demand and hence inflation in
the country. The real per capita GDP was Rest. 15025.8 in the year 1973; it turned to be
Rs. 17561.04 in the year 1980, it further went up to Rest. 23244.33 in the year 1990,
afterwards the upward trend continues to Rs. 264The association between inflation and
unemployment is a relationship which has got a great fame in the literature. The studies
like Robersons (1988); Cooley and Hansen (1989), Mortensen and Pissarides (1994), Shi
(1997), Pissarides (1999), Berentsen, Lagos and Wright (2005), Lehmann (2006), Beyer
and Farmer (2007), Kumar (2008), Berentsen, Menzio and 74.2 in the The association
between inflation and unemployment is a relationship which has got a great fame in the
literature. The studies like Rogersons (1988); Cooley and Hansen (1989), Mortensen and
Pissarides (1994), Shi (1997), Pissarides (1999), Berentsen, Lagos and Wright (2005),
Lehmann (2006), Beyer and Farmer (2007), Kumar (2008), Berentsen, Menzio and year
2000 and finally it reaches to Rs. 34588.9 in the year 2010.

Concluding:
I would like to suggest that with proper economic planning, consistent policies of
government, better law and order situation, abolishing energy crisis, sincerity with
Pakistan and by adopting the Islamic economic system we can not only tackle the issue of

unemployment but every economic problem of our country as well. Pakistan is currently
undergoing process economic liberalization with includes privatization of all government
corporations, aimed to attract foreign investment and decrease budget deficit.
Government Legislation (Development Programs/ Government not to create employment
opportunities)
Nepotism or Favoritism.