Pakistan’s labour force participation lowest in the region
March 02, 2012
Pakistan’s labour force participation in economy is estimated to have reached at the lowest in the region on the subsequent closure of industries, slow down in business growth and limited employment opportunities in the market.
The country’s labor force is estimated to amount to 58 million in 2011 and its participation was stood at 33 percent, which is very low compared to 45 percent for other South Asia countries and over 50 percent for advanced economies, according to IMF report based on Pakistan Labour Force Survey.
Analysts said the estimates were conservative as the labour participation are below the projected percentage after unemployment and retrenchment of the jobs were seen widespread in past couple of years after floods’ destruction and worsening energy crisis.
The agriculture is the largest employer followed by textile and engineering industries. Besides, telecom, transport and construction sector remained the cause of livelihood of millions of citizens.
Pakistan’s population has grown by an average 2.2 percent per annum over the past decade, and it is estimated to amount to 177 million by 2011. The country needs to absorb more than 2 million new comers in the job market with the growth of businesses.
Labour Force Survey 2010/11 reports significant nominal wage disparities by area and by gender as the average nominal wages in urban areas exceed wages in rural areas by one-third, reflecting the higher share of urban employment in the non-agricultural and formal sectors.
The wide wage differentials and declining real wages have marked the wage structure in Pakistan in recent years, IMF pointed out. The nominal wages have not kept pace with the rise in inflation in past four years, with real wages falling by an average 1.5 percent during 2007/08 to 2010/11.
Although there is a legal minimum wage, it is not enforced across all sectors because massively a large part of the employed labor force is unpaid, works less than 35 hours a week, and works in the informal sector. Hence, the unemployment rate is said to stand at 6 percent.
The minimum wage was raised to Rs 7,000 per month on May 1, 2010, but the Labour Force Survey 2010/11 indicates 30 percent of wage earners received Rs 5,000 per month or less. The inflexibility in wage determination was rampant as wages are generally set outside a centralized bargaining process or contractual system without listing any formal state record.
The labour force constitutes 77 percent male and 23 percent female. Although the female participation rate has increased, from 9.3 percent in 2000 to 15.6 percent in 2011, it is less than one-third that of males in Pakistan and the lowest in South Asia, where it averages 44 percent.
While labor market access for women has improved over the years, this has not gone hand in hand with the creation of equal work opportunities for them.
The share of women working in wage employment has declined from 33 percent in
2000 to 21 percent in 2011 ; female employees earn around 63 percent of the average wage of males, and over 63 percent of employed women work as (unpaid) contributing family workers.
Pakistan’s labour market is less efficient than other countries in the region that continues to be a constraint to Pakistan’s competitiveness. The lack of skills, illiteracy, and unavailability of training opportunities have decreased the quality of labours’ participation overall which generate lesser outcomes despite tough physical work.
According to an estimate, 75 percent of informal workers were either in unskilled occupations (18 percent) or low skilled occupations (57 percent), suggesting Pakistan’s economy needs major investments in human capital and technology.
Pakistan has been ranked 136 out of 142 countries in labor market efficiency in the World Economic Forum’s Global Competitiveness Report 2011/12, slipping further behind 23 countries since 2007/08.
Pakistan needs to increase male and female participation in the labor force significantly, reduce redundancy cost, and improve the linkage between pay and productivity.
Despite all worsening situation and deepening crisis, there are strong hopes and predictions for Pakistan’s economy, its industries its labour force participation provided that policy makers firmly focus on the improvement of governance, law and order and energy crisis.
Recently the multinational companies’ Overseas Investors Chambers of Commerce and Industry (OICCI) have indicated positive investment plans of approximately $3billion in the next two to five years.
The positive business plans revealed an expectation of some economic stability and a modest improvement in Pakistan’s economic growth parameters including jobs generation in different sectors.
The government should resolve the energy crisis to provide oxygen to dying industries and business besides infrastructure development to promote foreign and local investments in the private sector for generating employments.
The improvement in labour market efficiency is critical if jobs are to be created in the formal private sector through public-private partnership projects.
The government should be introduced reforms in labor laws and institutions with the objective of striking a balance between ensuring fundamental rights to workers and increased efficiency and productivity of the labor market.