Employment policy

The Covid-19 pandemic caused a significant decrease in economic activities, leading to loss of income and unemployment. According to the International Labor Organization (ILO), despite various measures to preserve employment and protect incomes, unemployment rose from 187 million in 2019 to 220 million in 2020.

ILO estimates reveal that women and young people have been disproportionately affected by the pandemic, indicating a 5 percent decline in employment for women compared to 3.9 percent for men and 8.7 percent for young people compared to 3.7 percent among adults in 2020. The massive unemployment led to a significant increase in poverty and inequality. ILO estimates show that the number of working people in extreme poverty increased by 31 million between 2019 and 2020 globally. Pakistan has also witnessed a similar increase in unemployment and poverty. Projected estimates show that unemployment has increased from 5.5 million in 2019-20 to 6.2 million in 2020-21. A significant increase in unemployment was observed among the young and female population in 2020-21. Unemployment and falling income due to business closure resulted in an increase in poverty of 9 million between 2019-20 and 2020-21 in Pakistan.

Providing decent employment remains the prime agenda of any government, including Pakistan. The importance of decent work to promote economic development is underlined in Goal 8 – "promote inclusive and sustainable economic growth, employment and decent work for all" – of the Sustainable Development Goals (SDGs), whose objective is to "achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value" by 2030.

According to the World Bank, the working-age population will increase by 250,000 every month in Pakistan. More than 1.4 million additional jobs will be needed every year to absorb new entrants to the labor market and keep the employment rate constant. This implies that more than two million jobs are needed every year to accommodate the existing inactive or unemployed workforce and young people just entering the labor market.

However, the fragile economic recovery undermines future employment prospects for those who become inactive or unemployed during the pandemic and for the youth entering the labor market. According to the ILO, limited access to vaccines and fiscal imbalances slow down the resumption of work in developing countries. To generate two million jobs each year, it is proposed to focus on following a policy framework that aims to ensure ‘decent work for all’.

First, high and inclusive growth is a prerequisite for generating employment. The government should promote inclusive economic growth through investment in the sector that can provide decent jobs such as infrastructure, agriculture, construction, tourism, and the digital economy. Immediate investment priorities should include investment in agriculture (cash crops and agriculture-led industries), housing infrastructure, and tourism.

In particular, the government should focus on agriculture-based industrialization to accommodate the low-skilled workforce. Currently, the agriculture sector is characterized by low productivity, poor working conditions, and gender inequalities, therefore devoid of value addition and investments. The government should focus on agriculture-led industrialization with forward and backward linkages to other economic sectors supported by a well-defined package of public investment, trade, a supportive regulatory environment, and technological support.

Second, macro stability is essential to promote private investment, which is a key determinant of economic growth. High fiscal deficits, double-digit inflation, and volatility in exchange rates are major obstacles to achieving long-term stability. The government should try to maintain stability by fixing the budget deficit, inflation, and the exchange rate. These measures not only encourage foreign direct investment (FDI) but also stimulate private sector-led growth.

Third, the government should facilitate a shift from brick and mortar to online commerce. To this end, the government ensures the provision of telecommunication services, in particular the internet, throughout the national territory. E-commerce offers decent jobs to educated women and young people with a small investment. The government must invest in digital infrastructure and also remove regulatory barriers to upgrade infrastructure in places with insufficient access and allow the private sector to make investments in the digital economy, especially in telecommunication services. Young people living in rural areas, especially women, need technical support to start online businesses. Local-level training centers should be established to provide technical support to start an online business.

Fourth, graduation schemes for the ultra-poor are very effective in generating self-employment. Pakistan needs to design a comprehensive graduation programme to provide decent jobs to the ultra-poor. The programme should cover various complementary components, including asset transfer, cash assistance, skill development, consumption support, health insurance, financial inclusion, and addition to the market value chain. The programme design and implementation should be areas specific to reap the potential benefits of local markets. For example, hospitality would be an ideal occupation for the ultra-poor living in neighborhoods close to roads, CPEC routes, and highways.

Finally, the government should focus on ‘green jobs’ and ‘green economy’ to provide jobs for the rural community. ‘Green jobs’ not only strengthen weak natural resources but also serve as a source of income for the poor. The most common work activities are forestry, the reclamation of wastelands to create agricultural land, the production of organic fertilizers, and the cultivation of herbs. The ‘Green Graduation’ programme for the poor can be designed at the village level where the potential is maximum and local unemployed are available for work.

In essence, the proposed measures can guarantee employment opportunities for professional, highly-skilled, skilled, semi-skilled, and unskilled labor. To achieve the two million jobs each year target, well-established coordination is required among different stakeholders, namely ministries, technical institutes, private sectors, and ‘new entrants’ in the job market.

The writer is associate professor at the Pakistan Institute of Development

Economics (PIDE). Email: dr.iqbaln@gmail.com