Can Pakistan Economy Add 2 Million Jobs a Year?

[Riaz Haq]

About 20 million Pakistanis are expected to enter the labor market over the next 10 years. Can Pakistani economy add jobs at a rate of 2 million a year for the next decade to absorb all new entrants to its work force? What is Pakistan's employment elasticity? How fast must it grow to create these jobs? How much investment is needed to achieve the required growth rate?

Pakistan Labor Market:

Pakistan's work force is about 68 million, according to the World Bank. Its labor force expansion is the 3rd biggest in the world after India's and Nigeria's, according to UN World Population Prospects 2017.  Pakistan's working age population in 15-64 years age bracket is expected to increase by 27.5 million people to 147.1 million in 10 years, according to Bloomberg News' analysis of data reported in UN World Population Prospects 2017.  Pakistan's increase of 27.5 million is the third largest after India's 115.9 million and Nigeria's 34.2 million increase in working age population of 15-64 years old. China's working age population in 15-64 years age group will decline by 21 million in the next 10 years.

Source: Bloomberg

Employment Elasticity:

Employment elasticity is a measure of the percentage of new jobs added in the economy for  each percentage point increase in GDP. Employment elasticity of 0.5 means that there is 0.5% growth in jobs for each 1% growth in GDP.

Analysis of the World Bank jobs data shows Pakistan's employment elasticity was about 0.70 in the period from 2000-2010. A little over 5% annual GDP growth enabled the economy to add jobs at a rate of 3.6% a year for the new entrants in the labor market. Since then, Pakistan's GDP growth rate has declined along with a decrease in employment elasticity to about 0.50, according to Asian Development Bank.  The ADB reports says: "With an employment elasticity of GDP growth estimated to be around 0.5, economic growth of at least 7% is required to provide sufficient jobs".

Source: World Bank Report "More and Better Jobs in South Asia"

Savings and Investments:

Rising working age population and growing workforce participation of both men and women in developing nations like Pakistan will boost domestic savings and investments, according to Global Development Horizons (GDH) report. Escaping the low savings low investment trap will help accelerate the lagging GDP growth rate in Pakistan, as will increased foreign investment such as the Chinese investment in China-Pakistan Economic Corridor. Increased savings and investments will not only enlarge the nation's tax base but also help create more jobs for the expected new entrants into the work force as it did in 2000-2010, according to a World Report titled "More and Better Jobs in South Asia".

Economic Growth Rate:

Historic data suggests that it takes investment of 4% of GDP to achieve 1% GDP growth, a capital to output ratio (COR) of 4, according to Pakistani economist Mohsin Chandna.  This COR ratio will require an investment of 28% of GDP to reach 7% economic growth necessary to create over 2 million jobs a year over the next decade.

Pakistan's current savings rate of around 13% will clearly not be sufficient to get to the goals of 28%. This gap will need to be filled by a combination of increased savings rate and substantial increase in foreign direct investment (FDI).

Rising working age population and growing workforce participation of both men and women in developing nations like Pakistan will significantly boost domestic savings and investment. Increased foreign direct investment such as Chinese investment in China-Pakistan Economic Corridor over the next several decades will help fill the gap between the national savings rate and investments required to reach 7% annual GDP growth to create over 2 million jobs a year.

Summary:

Pakistan needs to create over 2 million jobs over the next decade to absorb new workers entering the labor market. With an employment elasticity of 0.5, it will require 7% annual GDP growth. A combination of increased domestic savings and higher foreign investment flows will be needed for investment of 28% of GDP to achieve the required economic growth for sufficient job creation in the country over the next 10 years.

Here's a discussion on this and other subjects:

https://youtu.be/ucopTLFQdKY



Related Links:

Haq's Musings

Pakistan's Labor Force Expansion on Saving, Investments and GDP Growth

Pakistan's Population Growth: Blessing or Curse?

Pakistan's Expected Demographic Dividend

World Bank Report on Job Growth in Pakistan

Underinvestment Hurting Pakistan's GDP Growth

China-Pakistan Economic Corridor

Musharraf Accelerated Growth of Pakistan's Financial and Human Capital

Working Women Seeding a Silent Revolution in Pakistan

Median Income and Wealth in India and Pakistan

[Riaz Haq]

#India's exports up just 1.2%. Share of #India's #exports in #GDP at 14-year low of 19.4%. #Modi #BJP
http://www.business-standard.com/article/economy-policy/share-of-ex...

The share of export in India’s gross domestic product (GDP) declined to a 14-year low during the first quarter (Q1) of the current financial year (FY18). Growth in export of goods and services has remained below overall economic growth since FY15. Exports were up only 1.2 per cent at constant prices during the first quarter of FY18, against 5.7 per cent year-on-year (YoY) growth in GDP during the period. In value terms, India’s exports has been stagnant at around Rs 24 lakh crore (at 2011-12 prices) in the past three years, against 24 per cent cumulative ...

[Riaz Haq]

Why #India is now detached from the world, sitting out the global recovery in growth and jobs? #Modi https://blogs.timesofindia.indiatimes.com/toi-edit-page/uniquely-in... … via @TOIOpinion by Ruchir Sharma

In the global jobs picture, India stands out as even more of a sore thumb. The worldwide unemployment rate, as calculated by JP Morgan research, is almost back to its pre-2008 crisis low of 5.5 per cent. Developed economies from the UK to Japan have the lowest unemployment rates seen in many decades. In emerging economies, the unemployment rate has been falling since 2014 and this year even countries such as Russia and Brazil, which experienced deep recessions, are seeing a marked improvement in the labour market. In India, meanwhile poor quality data makes it difficult to put a number on the job woes, but the available data is grim and news stories about jobs losses abound.

---------

The best explanation lies in recent domestic policy moves, as until last year both India and emerging markets broadly were slowing down in sync. A disconnect began late last year when growth in emerging markets started recovering and India kept slowing.
The first of the policy moves was the unique demonetisation experiment. The second was the Goods and Services Tax, which was supposed to bring India in line with global standards but instead added typically Indian layers of complexity. These policies disrupted local businesses, including exporters. Imports have surged to meet consumer demand, widening the trade deficit and cutting into GDP growth.
It is disappointing that India is missing out on the global revival in economic growth, but perhaps even more troubling that it is missing out on jobs growth – a trend that precedes the GDP slowdown but has also gotten worse over the past year.
Many commentators are blaming these troubles on global forces. In India, especially, it is popular to talk about how automation is taking jobs away from humans. But the global jobs boom suggests that there is little evidence for such losses. At any point in time technology is destroying some traditional jobs, and creating them in new industries.
India’s apologists also point to “premature deindustrialisation”, the idea that it is increasingly difficult for countries to export their way to prosperity, because of a more competitive environment for manufacturing globally and slumping world trade. Even though trade volumes have perked up this year, they are well below the pace seen before 2008. And competing in global manufacturing, which was always the most important path to mass employment, is harder now following the rise of China.

[Riaz Haq]

BBC News - #India jobs: The signs point to a bleak outlook for #employment. #Modi #BJP #economy

http://www.bbc.com/news/world-asia-india-41495792#

Dr Abraham believes that existing jobs may have been drying up in India for a while now. Jobs in farming where nearly half of Indians are engaged for their livelihood - too many people cultivating too little land - are disappearing. Successive droughts and unremunerative prices have pushed people out of farms to seek jobs in construction and rural manufacturing. A McKinsey Global Institute study says farm jobs had reduced by 26 million between 2011 and 2015.
But a slowdown in growth - GDP growth has been falling for six consecutive quarters and hit a three year-low of 5.7% during April-June - triggered in part by a controversial cash ban last year and July's imposition of a sweeping but clunky Goods and Services tax that has adversely affected labour-absorbing sectors like farming, construction and private businesses, hitting jobs further.

Hiring in more than 120 companies - metal, capital goods, retail, power, construction and consumer goods - has fallen, according to an analysis by The Indian Express. This, a top HR executive told the newspaper, "reflects upon the lack of expansion plans and near-term growth expectation of these companies".
India's Economic Survey says creating jobs is India's "central challenge". More than 12 million Indians will be entering the labour market and looking for jobs every year until 2030. Some 26 million Indians - roughly a population equal to Australia's - already are looking for regular work.
'Scratching a living'
India has a curious jobs problem. Unlike in the West, there are no dole queues, for example, which are a marker of unemployment. Economist Vijay Joshi says poverty and lack of a social security system "ensure that most people have to scratch a living somehow, simply in order to survive".
Also there are many "openly unemployed people" who are supported by their families. Then there's a vast amount of underemployment - too many people sharing work that could be done by fewer hands. Many work for long hours with poor returns.
Also, most people - more than 80% of the labour force - work in the sprawling, unorganised or informal industries with poor working conditions, paltry wages and scanty benefits. Very few of these jobs lead to security of income, location or employment. Only 7% of Indians actually work in the formal economy with full benefits, according to estimates.

[Riaz Haq]

Pakistan looks to increase share of CPEC labor market
KHURSHID AHMED | Published — Friday 16 February 2018

http://www.arabnews.pk/node/1247666/pakistan

KARACHI: Pakistan expects the demand for skilled manpower to grow exponentially as the multibillion-dollar China-Pakistan Economic Corridor (CPEC) project expands.
“The total cost of CPEC projects has already gone from $46 billion to $62 billion and it is hoped that the total cost will rise to $100 billion by 2030,” Executive Director of the Planning Commission’s Center of Excellence (COE) for CPEC Dr. Shahid Rashid said in a press briefing on Thursday.
Many Pakistani institutes are now offering a range of courses — including Chinese-language — to enable Pakistani youths to find employment, and China has vowed to help set up a world-class vocational training institute in Islamabad. More institutes are expected to open in Pakistan in the near future to cover the expected rise in job opportunities offered by CPEC.
CPEC starts from Kashgar in Xinjiang, China, and reaches Karachi and Gwadar, on Pakistan’s south coast via the Khunjerab Pass.
Chinese Ambassador to Pakistan Yao Jing reiterated during a meeting with Executive Director of National Vocational and Technical Training Commission Zulfiqar Ahmad Cheema that CPEC will provide job opportunities to thousands of trained Pakistanis.
Jing vowed that China will soon initiate special programs for Pakistani trainers, which will enable them to teach hundreds of Pakistani workers every year how to use modern machinery and equipment.
Majyed Aziz Balagamwala, president of the Employers’ Federation of Pakistan and a member of the Sindh Technical Education and Vocational Training Authority, told Arab News that a training program “initiated with leading institutes” would produce 200,000 skilled workers in the next three years.
“We do not intend to just produce labor, our aim is to provide them with multiple skills so that they can get better jobs and play their role in the country’s economic uplift by contributing to CPEC,” he explained.
Analyst and CPEC expert Maqbool Afridi stressed the need to expand the skills of Pakistani workers.
“Chinese workers are highly technical. We need to change our attitude toward learning,” Afridi said. “If the Chinese can work with high tech knowledge, why can’t we?”
Afridi said CPEC is a world-class project that demands technically skilled manpower not only to run the projects, but also to balance the share of jobs between the two countries.
Despite substantial progress on CPEC, many are unhappy about how little information about the project has been shared with the public.
“We still don’t know much about the CPEC projects,” said Executive Director of National Organization for Working Communities Farhat Parveen. “The government has been secretive, instead of sharing information about the projects and the number of people required so that skilled workers are imparted with the required training.”

[Riaz Haq]

Japan to provide $4 million to help generate employment in Pakistan

https://asia.nikkei.com/Politics-Economy/International-Relations/Ja...

Japan signed a commitment Monday to provide $3.9 million to the United Nations Development Program in Pakistan for an initiative aimed at generating nearly 20,000 jobs for youth in the provinces of Sindh and Khyber Pakhtunkhwa.

The agreement, signed by Japanese Ambassador Takashi Kurai and UNDP Country Director Ignacio Artaza at a ceremony in Islamabad, covers funding to help set up 50 community centers in the two provinces.

The centers will provide vocational training, particularly in information technology, to young people to prepare them for self-employment or employment in different vocations.

"Japan will continue to support youth and young women so that they can take the lead in development of the country, which has bright future with young population," Kurai said in his speech.

Pakistan has a population of 207 million, with 31 percent between 15 and 29 years, and a youth unemployment rate of over 10 percent.

"It is crucial to invest in this 'youth bulge' and provide young people with the skills and knowledge they need to operate in an increasingly competitive employment market, and to help Pakistan's youthful population to contribute in its sustainable development," the Japanese Embassy said in a statement.

Khyber Pakhtunkhwa and adjacent tribal areas bordering Afghanistan have been dubbed as nursing grounds for terrorism, with officials and studies often attributed this to lack of employment opportunities and poverty.

[Riaz Haq]

The Inter­na­tional Labour Organisa­tion (ILO) has warned that Asia-Pacific still faces structural weaknesses in its labour markets despite two decades of economic growth.

https://www.dawn.com/news/1446301


https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---s...

In its ‘Asia-Pacific Employ­ment’ and ‘Social Outlook 2018’, released on Friday, ILO pointed out that although the regional unemployment rate is projected to remain 4.1 per cent through 2020, the vulnerable employment rate is expect to creep up towards 49pc, reversing a downward trend of at least two decades.

The region’s future prospects will require that economic growth go hand in hand with a further expansion of decent work, it says.

While real wage growth surpassed labour productivity growth between 2010 and 2016 in almost all countries, the increase in wages of employees looked especially strong in China, Thailand and Vietnam. However, negative wage growth was witnessed in Pakis­tan in 2015-16 at minus 4.7pc.

In Pakistan’s education sector, 6.6pc of the total female employment in 2016 was well behind the 72.9pc share in agriculture and 12.7pc in manufacturing.

Pakistan stands out with 15.3pc of women working from their homes, and 37pc working on the land (in agriculture) in 2017.

Structural transformation has been strongly felt in the region, with employment moving from agriculture mainly into services and only to some extent into industry. Most of the loss in agriculture was taken up by the increase in employment in the services sector, where 740 million jobs have been gained since 2000.

Manufacturing jobs dec­rea­sed slightly from the peak in the mid-2000s, with more job losses accruing to women than men.

The report says while the Asia-Pacific region has made rapid progress to substantially reduce extreme poverty, one fourth of all workers in the region — 446m workers — still lived in moderate or extreme poverty in 2017 and nearly half of the workforce — 930m people — were still making a living in vulnerable employment as own-account or unpaid contributing family workers.

With 1.9bn workers — 1.2bn men and 700m women, the Asia-Pacific region represented 60pc of the global workforce in 2017.

Asia and the Pacific has the most people working, relative to the working-age population. Employment-to-population ratio stands at 59.7pc, compared with 58.6pc at the global level.

Large numbers of workers in the region, especially those in low-paid jobs, work more than 48 hours per week.

The average hours worked in Southern Asia and Eastern Asia in 2017 were the world’s highest, at 46.4 and 46.3 hours per week, respectively.

In Eastern Asia, almost one in five workers worked in excess of 60 hours per week. The regional unemployment rate at 4.1pc is the world’s lowest and well below the global rate of 5.5pc in 2017. But while the global unemployment rate has held steady since 2015, the rate in the Asia-Pacific region has increased slightly by 0.1 percentage point.

In total there were 80.9m unemployed persons in Asia and the Pacific in 2018.

At 10.4pc, unemployment rate among youth remained unchanged from 2015, while the global rate increased to 12.6pc. Thirty five per cent of the region’s unemployed were youth (aged 15—24), although youth made up only 20pc of the working-age population.

In general terms, the labour market gains evident in the Asia-Pacific region in the past few years remain present but fragile.

Decent work deficits persist in all countries in the region and continue to weigh heavily on development trajectories.

Over the coming years, economic growth is expected to remain strong in the region, with growth rates of 5.6pc expected for 2018 and 2019, compared with 3.9pc at the global level.

[Riaz Haq]

#Pakistan Social sector to get special focus in #CPEC 2nd phase to begin in 2019: #Chinese diplomat Lijian. #education #health | World | http://thenews.com.pk  | Pindi

https://www.thenews.com.pk/print/412001-social-sector-to-get-specia...

http://cpec.gov.pk/social-sector-development-projects

Social sector will get special attention in the second phase of China-Pakistan Economic Corridor (CPEC), said Acting Ambassador of China Zhao Lijian.

The second phase begins with the start of new year, 2019, he said while talking here in FM-98’s program “Hum Qadam”. The initial phase of the CPEC has focused on infrastructure and energy projects in Pakistan which witnessed significant growth.

During the next 5 years, small projects will be the focus of attention under the CPEC, which include renovation of schools, innovation in hospital system, poverty reduction, model villages and supply of clean water for the public.

In addition to this, small scale power generation projects will be built in remote areas, Zhao liJian said adding in the education sector more than 22,000 Pakistani students are studying in China, while more Pakistani students will be sent their for higher education.

He said that more Pakistanis would be trained in China and Pakistan to overcome the problem of manpower for Chinese companies working on various projects in Pakistan. The Acting Ambassador said, the construction of Karakoram Highway from Hawelian to Thakot and Motorway M-5 from Multan to Sukkur will be completed soon.

Furthermore, he said that 7 key projects of energy have been completed in Pakistan including solar, wind and coal-generated projects, due to which significant reduction in energy problems has been seen, while work on more projects is going on speedily.

Referring to the negative reports about CPEC in local and western media, the Ambassador said, CPEC is being built with national consensus. He said that despite controversy in political matters between the political parties, complete consensus about CPEC and Pak-China relations is there inarguably.

He contended, public awareness is needed in response to negative reports published in this regard. Zhao LiJian further said that the people should be aware of the basic objectives of negative propagators, because their negative reports generally give the impression that the CPEC is a burden on Pakistan's economy on account of interest rates. All such reports are baseless without having any ground reality, he categorically stated.

[Riaz Haq]

The country’s unemployment ratio stood around 5.8 percent in the country, according to a survey of Pakistan Bureau of Statistics (PBS) on labor force 2017-18.

https://dunyanews.tv/en/Business/473968-Unemployment-ratio-stands-a...

http://www.pbs.gov.pk/sites/default/files//Labour%20Force/publicati...

http://www.pbs.gov.pk/content/labour-force-survey-2017-18-annual-re...

While the ratio of male unemployment stood at 5.1 percent, unemployment ratio in female stood at 8.3 percent.

As per the data released by PBS, agriculture sector provided 38 percent of employment in FY17-18, less than the 42 percent it was providing five years ago.

Industrial sector provided 23.7 percent of jobs in the said period, whereas the ratio was 22.6 percent five years back.

Service sector provided jobs to 37.8 percent, a slight jump from 35.1 percent five years back

Furthermore, literacy rate in country stood around 62.2 percent, with literacy rate for male at 71.6 percent and female at 51.8 percent.

[Riaz Haq]

The Future
of Jobs
Report
2020
Pakistan

http://www3.weforum.org/docs/WEF_Future_of_Jobs_2020.pdf

Pakistan Working Age Population 82,345,263

Digital skills among active population* WEIGHTED AVERAGE 2019-2020 50.7%

Attainment of basic education 2017 36.4%

Business relevance of basic education* WEIGHTED AVERAGE 2019-2020 45.6%

Attainment of advanced education 2017 8.7%

Business relevance of tertiary education* WEIGHTED AVERAGE 2019-2020 54.9%

Supply of business-relevant skills* WEIGHTED AVERAGE 2019-2020 51.1%

Unempl. rate among workers with adv. educ. 2018 4.5%

Unempl. rate among workers with basic educ. 2018 2.3%

Share of youth not in empl., educ. or training 31.1%

The survey was distributed via an online platform
through three dissemination networks. The primary
distribution route was to the World Economic Forum
partners and constituents in collaboration with
the World Economic Forum Regional and Industry
teams. The survey was further disseminated through
a network of Partner Institutes—local partner
organizations that administered the survey in their
respective economies. Further dissemination through
partner organizations enabled the strengthening of
regional representation by extending the sample to
local companies. As a third dissemination channel,
the New Economy and Society team shared the
survey with the collaborators from the countries in
which the Closing the Skills and Innovation Gap
Accelerators are present (South Africa, UAE, Bahrain,
India, Pakistan). The Accelerator project brings about
tangible change by building a national public-private
collaboration platform to increase employability of
the current workforce and increase work-readiness
and critical skills among the future workforce.