TERM PAPER
Submitted to: Sir Abdul Farooq
Submitted by: Muzammil Shahid (10) Ifzal Ahmed (09) Hajra Fazal(29) Adeel Abid(08) (F005-BBA) Date: 11, December 2006
Contents 1. Introduction 1.1 Statement of problem 1.2 Objectives of Study 1.3 Methodology and source 1.4 Organization
3 3 6 7 7
2. Review of literature
8
3. Analysis of Data 3.1 Global Causes of Unemployment 3.2 Costs and effects of Unemployment
23 23
3.3 Situation of Unemployment in South Asia 3.4 Situation in Pakistan 3.5 Role of Pakistan Government
26 29 31
24
4. Suggestions and Conclusions 6. References
33 38
List of Illustrations Table 1
27
Table 2
28
Table 3
30
Figure 1
27
Figure 2
38
Appendix A Appendix B
36 37
2
1.
1.1 Stat tatement of of Pr Problem
Major obstacles in the path of Economic Development and Growth of the Underdeveloped countries, better to say developing countries are: Poverty, Inflation, illiteracy, Unemployment, Capital deficiency, Lack of saving and investment, Low GDP growth rate, Unequal income distribution, Political and economic Instability, and poor health, transportation and sanitation facilities.
These are only the few obstacles out of long list of problematic situations. situations. Out of these we can say the most important important or one of the
bases
of
many
other
problems
is
the
problem
of
Unemployment or Underemployment.
Lacking a job often means lacking social contact with fellow employees, a purpose for many hours of the day, lack of selfesteem, esteem, mental stress and illness, and of course, the inability to pay bills and to purchase both necessities and luxuries. These effects are especially serious for those with family obligations,
3
debts debts,, and/ and/or or medic medical al cost costs, s, wher where e the the avail availab abili ility ty of health insurance
is
often
linked
to
holding
a
job.
Increasing
unempl unemploym oyment ent raises raises the crime rate rate,, the the suicide rate rate,, and and enco encour urag ages es
bad bad
health. health.
During
the
Grea Greatt
Depr Depres essi sion on,,
unemployment rates exceeded 20% in many countries. Finally, high unemployment implies low real Gross Domestic Product human resources are not being used as completely as possible and and are are thus thus wasti asting ng opp opportu ortuni niti ties es to prod produc uce e good goods s and and services. services. Mostly unemployment unemployment thus represents represents a profound profound form of inefficiency of inefficiency.. In year 2005 labor force worldwide was mixed, with more people in work than in 2004 but at the same time more unemployed people than the year before. At the end of 2005, 2.85 billion people aged 15 and older were in work, up 1.5 per cent over the previous year, and up 16.5 percent since 1995. The
last
decade
has
witnessed
a
decline
in
the
global
employment-to-population ratio, which is the share of the world’s working-age population (aged 15 years and older) that is in work. It stood at 61.4 in 2005, which is 1.4 percentage points lower than ten years ago (Appendix A) . The decrease was stronger stronger among young people (aged 15 to 24). Wit Within hin this this grou group p the the globa globall empl employ oyme ment nt-t -to-p o-pop opul ulat ation ion rati ratio o decr decrea ease sed d from from 51.7 51.7 in 1995 1995 to 46.7 46.7 in 2005 2005.. Part Part of this this is expl explai aine ned d by the the incr increa easi sing ng prop propor orti tion on of youn young g peop people le in
4
education. Among adults (aged 25 years and older) the global empl employ oyme ment nt-t -too-po popu pula lati tion on
rati ratio o
decl declin ined ed from from 66.8 66.8 to
66.3 66.3
between 1995 and 2005. Examining the adult age range by sex revea reveals ls diffe differe rent nt tren trends ds betw betwee een n wome women n and and men: men: while while the the share of employed adult males fell by 1.3 percentage points to 80.8 per cent, the share of the adult female population that was in work work grew grew.. In 2005 2005,, 52.2 52.2 per per cent cent of adul adultt wome women n were were employed, compared with 51.7 per cent in 1995. The gap in the employ employmen ment-to t-to-po -popula pulatio tion n ratio ratio betwee between n women women and men thus has narrowed but remains wide. The world’s unemployment rate in 2005 stood at 6.3 per cent, unchan unchanged ged from the previou previous s year year and 0.3 percen percentag tage e points points higher than a decade earlier (Appendix B). In total, nearly 191.8 million people were unemployed around the world in 2005, an increase of 2.2 million since 2004 and 34.4 million since 1995. Almost half of the unemployed people in the world are young people, a troublesome figure given that youth make up only 25 per cent of the working age population. Young people are more than three times as likely as adults to be unemployed.
unemploymen unemploymentt rate stayed at 4.7 per cent in 2005 and South-East Asia and the Pacific’s unemployment rate was 6.1 per cent. The Empl Employ oyme ment nt
faces five major employment challenges. Chal Challen lenge ge
One ,
South
Asia
is
a
hugely
populated region with 1.4 billion people, 60 per cent of whom are
5
in the working-age group. Two , labor force participation is only abou aboutt
66 per per
cent cent of the the
worki orking ng-a -age ge popu popula lati tion on..
Three ,
employ employmen mentt growth growth rates rates are lower lower than than both both gross gross domest domestic ic product (GDP) and labor force growth rates . Four , agriculture is the the
pred predom omin inan antt
empl employ oyer er,,
alth althou ough gh this this sect sector or has has
been been
suffering from lack of investment and low productivity since the Green Revolution during the 1960s. Five , one-third of South Asia is in poverty; and, about half of the population — in four large countri countries es — is illitera illiterate. te. Despit Despite e of the continu continuous ous econom economic ic grow growth th of worl world d unem unempl ploy oyme ment nt cont contin inue ue to be the the seri seriou ous s problem for all nations.
1.2 Objectives of the study
Major objectives of our study related to this term paper are to discuss: •
Major causes of unemployment in Developing countries
•
Major effects of unemployment in Developing countries
•
Changes Changes in employment employment and unemploymen unemploymentt pattern pattern around the globe and with special importance to Asian countries. I.e. Pakistan, India and Bangladesh.
•
Role of Pakistan Government regarding unemployment
Term Term pape paperr will ill also also give give sugg sugges esti tion ons s to redu reduce ce and and aid aid unemployment in developing countries like India, Pakistan. 6
1.3 Methodology and Sources of Data
Most of the data is collected from internet for this term paper. Stati Statist stic ics s and and figur figures es are are gath gather ered ed from from relia reliable ble site sites s of ILO (International labor Organization), WB (World Bank), ADB (Asian Development Bank) and SBP (State Bank of Pakistan). Both Both abso absolu lute te valu values es and and perc percen enta tage ges s are are used used to disc discus uss s chan changin ging g patt patter ern n of empl employ oyme ment nt and and unem unemplo ploym ymen ent. t. All All the the statistics use in the paper are of 1995-onward up to 2005.
1.4 Organization
First introductory part of this term paper discuss about global scenario of unemployment in detail with especial reference to Situations in South Asia. Objectives of study are also given in this part of paper. Then comes the review of literature which include summarized articles of unemployment about situations in world and also related to Asian developing countries. Then in the thir third d part part,, name named d as Anal Analys ysis is of Data Data,, all all the the obje object ctiv ives es of causes, effects and role of governments regarding unemployment are fulfilled.
7
Katherine Hagen, ILO's Deputy Director-General,(1996) said, By
the year 2000, one-half of humanity will be living and working in cities, with developing countries accounting for the major share of the world's new urban population. These people will need jobs if the new citi ities are to develop as centers of economic opportunity and civilization rather than zones of inequality and misery. Only the generation of productive employment can break the vicious circle of urban poverty that is taking root in cities worldwide. In spite of the problems caused by rapid urbanization, cities are righ rightl tly y rega regard rded ed as cent center ers s of prod produc ucti tivi vity ty and and engi engine nes s of econ econom omic ic
grow growth th..
Urba Urban n
cent center ers s
make make
a
disp dispro ropo port rtio iona nate te
contr contrib ibut ution ion to Gros Gross s Dome Domest stic ic Prod Produc uct. t. This This is also also true true for many developing developing countries. For example, example, although Kenya is 23% urban, Nigeria 35% and India 27%, the urban areas in all three countries account for 70 % of GDP . In ILO's view cities are a resour resource ce that that needs needs to be develop developed ed continu continuous ously ly and with a view to increasing human well-being and social justice. Unemployment is not not conf confine ined d to deve develo lopin ping-c g-cou ount ntry ry citie cities. s.
Citie ties
in develop loped countries ies have
been hit hard
by
de-
industrialization, since most manufacturing was located in cities. Over the last two decades the average drop in manufacturing 8
empl employ oyme ment nt in G7 coun countr tries ies was was 15 %. Amon Among g the the larg larger er EU countries, the UK's share of manufacturing employment declined by 43%, 43%, Fran France ce''s by 23% 23% and and Germ German any' y's s by 14%. 14%. Mos Most EU countries are struggling with double-digit unemployment. The US has low unemployment, but average real wages have stagnated in the last 20 years, and high pockets of unemployment do exist in some large U.S. cities.
International Labor Organization (ILO), (1996) says, one-third of
the worl world' d's s inne innerr-cit city y popu popula latio tion, n, appro approxi xima mate tely ly 400 400 milli million on people, is living in poverty, with lack of productive employment as one of the most direct causes. By the year 2000, the ranks of the the urba urban n poor poor are are expe expect cted ed to have have swel swelle led d to one one bill billio ion n people. le.
In
absolut lute
terms,
Asia repr repres esen ents ts
the the
larg larges estt
concentrations of urban poverty in the world. In the developing world, African cities have the highest percentage of poverty, with 41 % of the urban population living below the poverty line. The report, says that in both developed and developing countries, the rise in urban joblessness causes urbanization of poverty. The ILO estimates that there will be 1.2 billion new participants to the world labor market by the year 2025. Most of the new jobs will have to be created in cities. The share of non-agricultural employment grew by 93 per cent in the last four decades, and
9
now accounts for 40 per cent of all employment in developing countries.
Sunchild (1998) writes unemployment is good for big business,
and even small business. The higher the rate of unemployment the more more peop people le ther there e are are look lookin ing g for for work work,, the the more more peop people le there are looking for work then the more likely they are to put up with poor working conditions and poor pay, they more willing they are to put up with poor conditions and pay the easier it is for businesses to grow as they do not need to worry much about work worker er strik strikes es and and union unions. s. This This expl exploit oitat atio ion n of the the work worker ers, s, allo allows ws busi busine ness sses es to save save the the mone money y they they shou should ld real really ly be paying out and use it to further there own goals. Any company like McDonalds why bother to employ more young people when it could could buy buy a mach machin ine e such such as a FryFry-Ba Bask sket etin ing g Mach Machin ine. e. The The machine although may cost more money cannot refuse to work, does not call in sick, is not late, does not need breaks, can work all all day day and and all all nigh night, t, and and is gene genera rall lly y reli reliab able le.. Fina Finall lly y once once company has paid for the machine it no longer needs to pay more (other than electricity etc). This means that this money can be used used to further further buy more machine machinery ry to replac replace e more more worker workers s until only few are left in place. The companies are aiming for the highest output for the cheapest cost and not even governments can can make make law law that that a cert certai ain n numb number er of empl employ oyee ees s must must be
10
employed; rather they must beg the companies to do it and offer them tax incentives, money which is later taken from the pocket of the tax payers and workers. Capitalism favors this type of system that leads to unemployment.
Syed M. Aslam (1999) writes that after fifty years, in Pakistan the
dream of Quaid-e-Azam still remains to be materialized as the successive governments failed to exploit the natural and human resou resourc rces es wise wisely. ly. The The econ econom omy y is in such such a wors worsen enin ing g stat state e which the country never experienced before. The biggest portion of the budget today goes towards the payments of foreign debts. Little Little is left left for for educ educat atio ion, n, heal health th and and deve develo lopm pmen ent. t. This This has has taken a serious effect on the employment opportunities in the country where finding a job at all levels is becoming harder by everyday due to frequent lay-offs in the public and private sector. There are many seekers but few jobs. In a society where ‘who you know’ has replaced ‘what you know’ as the major criteria for
jobs jobs,, chan chance ces s of empl employ oyme ment nt are are mise misera rabl ble e due due to mass massiv ive e downsizing in the public sector. Tens of thousands of graduates leaving the universities every year are finding it harder to find a suitable employment. Unemployment weakens the economic and social social stabili stability ty of any societ society. y. Societ Societies ies which which fail to provid provide e gainful gainful and secure secure employm employment ent to their their people people invite invite politic political al instability, social unrest and economic insecurity. Unemployment
11
issu issue e has has take taken n a glob global al view viewpo poin int. t. Many Many of the the deve develo lope ped d coun countri tries es beca became me more more prote protect ctio ioni nist st raisi raising ng new new prote protect ctiv ive e barriers against imports, particularly the competitive products, from the developing countries to further worsen an already bad situation. The socio-economic fall out of the high unemployment rate in Pakistan is evident evident from the drastic increase increase in the crime wave. Today robberies, and kidnapping for ransom have become a fearsome fixture of life in the country. The resultant lack of civil peace and the rule of the law weaken the very basis of all indu indust stri rial al,,
econ econom omic ic
Economic
policy
and and
plays
trad trade e a
vital
acti activi viti ties es role
to
in
the the
help
coun countr try y.
keep
the
unemployment rate under check. According to a UN report, the East East Asian Asian econ econom omies ies in the the 1980 1980s s avoid avoided ed stag stagna natio tion n and and unemployment did so because they got their domestic policies right right by care careful ful borr borrow owin ing, g, crea creati tive ve use use of forei foreign gn exch exchan ange ge rates, promotion of exports, and protection of food growers and restraint of nominal wages. All these measures have combined to keep keep the the grow growth th of empl employ oyme ment nt in flat flat comp compar ared ed to over overal alll economic growth.
Miss: Samina Khalil and Rao Noman Saleem (1999 ) from Applied
Econ Econom omic ics s Rese Resear arch ch Cent Centre re,, find finds s that that Unem Unempl ploy oyme ment nt is a central problem because when unemployment unemployment is high, resources resources are wasted wasted and people people's 's income incomes s are depres depressed sed;; during during such such
12
periods periods,, econom economic ic distre distress ss also spills spills over over to affect affect people' people's s emot emotio ions ns and and fami family ly lives lives.. In Pakis Pakista tan n labo laborr force force inclu include de all persons who are of ten years and above, and during the period are without work, currently available for work and seeking for work work.. On the the basi basis s of the the popu popula latio tion n of 142. 142.87 87 milli million ons s with with Labor force participation rate of 27.46 percent, the total labor force comes to 39.24 million. According to this about 2.4 million person of labor force were estimated as unemployed in 1999. Labour Force Force Survey Survey 1996 Accord According ing to Labour 1996-9 -97, 7, the the rate rate of open open
unemployment was 6.1 percent and 5.4 percent as per Labour Forc Force e
Surv Survey ey of
1994-95
This
indicates
that
rate
of
unemployment has increased between these two surveys by 0.7 percent officially but unofficially unemployment is much larger than this rate. Often it is perceived that unemployment rate of rura rurall area areas s is grea greate terr beca becaus use e in rura rurall area areas s ther there e are are less less chances of employment as compared to urban areas where there are more more chan chance ces s of empl employ oyme ment nt due due to more more indu indust strie ries. s. In Pakistan unemployment rate is increasing in both rural and urban areas in absolute as well as in percentage terms. From Okun's law we know that for every 2% fall in GNP relative to potential GNP,
the
unemployment
rate
rises
by
1%
point.
High
unemployment is a symptom of waste, when unemployment is high high,, the the econ econom omy y is not not prod produc ucin ing g up to high high leve level. l. When When economy is not producing sufficiently, we can say that we are unable to use our full resources for production purposes.
13
Kerstin Marx (2000) reported that the fallout from the financial
cris crisis is in Asia Asia that that bega began n in midmid-19 1997 97 has has caus caused ed mass massiv ive e unemploymen unemploymentt throughout throughout the region, region, according according to a new United Nations study. The economic disorder in Southeast and East Asia emphas emphasize ized d the weakness weakness of these these once once high high growth growth and full empl employ oyme ment nt
econ econom omie ies, s,
wher where e
unem unempl ploy oyme ment nt
rate rates s
have have
doub double led d and and even even trip triple led d in the the spac space e of a few few mont months hs.. ILO ILO statistics revealed that more than 150 million workers in 1997 are unemployed out of a world labor force of about three billion peop people. le. Addit Additio iona nally lly,, abou aboutt 25 to 30 perc percen entt of the the emplo employe yed d work worker ers s are are unde undere remp mploy loyed ed.. The The econ econom omic ic crisi crisis s in Asia Asia is blam blamed ed for for much uch of the the setb setbac ack k to the the world orld empl employ oym ment ent situation. Between August 1997 and December 1998, rapid job losses create unemployment rise in Indonesia from 4.3 million to 13.7 million people. In Thailand, the numbers exploded from 0.7 million in February 1997 to 1.9 million in December 1998. Even in less severely effected economies, such as Hong Kong, China, Malaysia and Singapore, there are now twice as many people with withou outt work ork as befo before re the the cris crisis is.. Befor efore e the the cris crisis is,, the the South Southea east st and and East East Asia Asian n coun countr tries ies ofte often n had had been been cite cited d as ''models of the positive impact of globalization in raising rates of economic Their Their
growth
macr macroe oeco cono nomi mic c
expo export rts, s,
trad trade e
and polic policie ies s
libe libera rali liza zati tion on
job
creation."
of
prom promot otin ing g
labor labor-in -inte tens nsive ive
and and
attr attrac acti ting ng
fore foreig ign n
dire direct ct
investment had raised the living standards and reduced poverty
14
within the region, according to the UN report. The crisis has now revealed that the rapid globalization of the world economy has posed new challenges which have made the goal of maintaining full employment a more complex undertaking.
Mr. Johann Van Rooyen (2001) writes about the cost and causes
of unemployment that as is the case also with so many other socio-e socio-econ conomi omic c proble problems, ms, the issue issue of unempl unemploym oyment ent is much much more complicated than it appears in the world’s surface. As no country country is free from its reveng revenge e but develo developing ping countries countries are hardly hit by it. To the people of poor countries job means access to the basic needs of life, self esteem, and to whatever in small way
contribu ibuting
to
the the
well being
of
the the
nation ion.
Being ing
unemployed the person is liability on family instead of an asset to the the soci society ety.. The The phys physica icall and and ment mental al stra strain in may may push push the the person to adopt illegal way of earning money. The unemployed repre represe sent nts s wast waste e of the the nati nation on beca becaus use e good goods s and and serv service ices s which could be produced by these unemployed now goes into waste. It also increase the expenditure of the nation in the form of social benefits and security provided to the effected people. There is wide survey that unemploymen unemploymentt in developing countries is caused by structural factors while in developed countries as in the past traditionally been associated with a downswing in the nati nation onal al busi busine ness ss cycl cycle e or a temp tempor orar ary y slum slump p in the the worl world d
15
economy. When referring to structural causes of unemployment one has in mind distinctive socio-economic characteristic, which by their very nature tend to reinforce low employment levels. Unem Unempl ploy oyme ment nt caus caused ed from from struc structu tura rall vari variab ables les has has great greater er permane permanency ncy while while cyclica cyclicall unempl unemploym oyment ent tends tends to fluctua fluctuate. te. Structu Structural ral causes causes of unempl unemploym oyment ent are more more persua persuasiv sive e and embe embedd dded ed in deve develo lopi ping ng soci societ etie ies. s. The The othe otherr caus causal al effe effect ct contributing to unemployment includes diverse factors such as diminis diminishin hing g donor donor interes interest, t, percei perceived ved politic political al instab instabilit ility, y, and secu securit rity y risk risk,, over over-re -regu gulat latio ion; n; labor labor mark market et inflex inflexib ibili ility ty;; and and irregular unstable industrial relations etc.
MOHAM MOHAMME MED D SHEHZ SHEHZAD AD (2004 (2004). ). Sout South h Asia sia face faces s five five majo major r
employment challenges, says the recent report of the Mahbub ul Haq
Human
Development
Centre,
South
Asia
2003:
the
Employment Challenge . One, South Asia is a hugely populated
region with 1.4 billion people, 60 per cent of whom are in the working-age group. Two, labor force participation is only about 66 per cent of the working-age population. Three, employment growth rates are lower than both GDP and labor force growth rates. rates. Four, Four, agricu agricultur lture e is the predom predominan inantt employ employer, er, althoug although h this sector has been suffering from lack of investment and low productivity since the Green Revolution during the 1960s. Five, oneone-th thir ird d of Sout South h Asia Asia is in pove povert rty; y; and, and, abou aboutt half half of the the
16
popu popula lati tion on
is
characterized
illi illite tera rate te by
South pervasive
Asia's
labor
market
unemployment
is and
underemployment, especially among the youth and the educated; work workin ing g poor poor who who do not not get get adeq adequa uate te wage wages s to get get out out of poverty; working children; and women who face discrimination across across the labor labor market, market, reflect reflecting ing prevai prevailing ling social social attitu attitudes des
UNEMPLOYMENT among the youth accounts for a major portion of the total total unempl unemploym oyment ent.. During During 1997, 1997, youth youth accoun accounted ted for 70% of the total unemployed unemployed in Sri Lanka, 53% in India and 45 % in
.
The The failur failure e to find jobs jobs appea appears rs to have have led the
educated youth towards either inactivity or further involvement in education. According to the 1998-1999 Labor Force Survey of Pakistan , 20 % of the post-graduate degree holders were out of
the the labo laborr forc force. e. Almo Almost st 50% 50% of fem female ale doct doctor ors s and and 35% 35%of graduates in different disciplines were reported to be out of the labor force The survey claims that the WTO failed to generate employ employmen mentt in the region region.. South South Asia's Asia's unempl unemploym oyment ent levels levels have raised from 2.9 per cent in 1995 to 3.4 per cent in 2001. Data Data from from ADB ADB show show that that unem unempl ploy oyme ment nt has has incr increa ease sed d in Pakistan, Bangladesh and the Maldives, while it has decreased only only in Sri Sri Lank Lanka a durin during g this this perio period. d. The The Econ Econom omic ic Surv Survey ey of India shows that the unemployment rate increased from 5.99%in 93-4 to 7.32% in 99-2000. The employment challenge in South Asia Asia is highly highly discrim discriminat inatory ory agains againstt women. women. Women' Women's s limited limited access to employment opportunities is best reflected in the gap
17
between the unemployment rates of men and women 3.5 times more unemployed then men in Pakistan.
Mahbu Mahbub-u b-ul-H l-Haq aq Human Human Deve Develop lopme ment nt Cent Centre re (2004 (2004) ) base based d in
Isla Islama maba bad, d, pres presen ents ts a rath rather er depr depres essi sing ng pict pictur ure e of huma human n development
in
the
region.
It
points
out
that
the
WTO
adminis administra tratio tion n has advers adversely ely impact impacted ed south south Asian Asian worker workers, s, parti particu cula larly rly those those in small small-sc -scal ale e
indu indust stri rial al and and agri agricu cultu ltura rall
enterprises. South Asia hopes of gaining from WTO rules in the key areas areas of agricul agricultur ture, e, textile textiles s and servic services, es, believ believing ing that that greater market access and a more even-handed trading system would allow them to use cheap labor to encourage exports, have failed to materialize. Secondly, HDC highlights the presence of severe gender discrimination discrimination in the job market, pointing out that most most women women are concen concentra trated ted in low-pay low-paying ing,, low-pro low-produc ductiv tivity ity jobs. HDC notes that adult literacy has raised, it adds that there is a rise in the number of the educated unemployed, generating a debate on the relevance of the educational system in various countries. Probably the most intense recent example of this is the high rate of farmer suicides across southern India, despite its emer emerge genc nce e as a sout south h Asia Asian n leade leaderr in IT. IT. Elab Elabora orati ting ng on this this inconsistency, the president of the Pakistan center, Khadija Haq, remarks that, "India's data on nutrition is worrying. There has been a higher level of hunger as reflected by data on under-
18
weig weight ht.. Indi India a expo export rts s food food grai grains ns now, now, yet yet nutr nutrit itio iona nall data data revea reveals ls the the high high occu occurr rren ence ce of hung hunger er in the the popu popula latio tion. n." " In neig neighb hbor orin ing g
Paki Pakist stan an,,
acco accord rdin ing g
to
Haq, Haq,
oneone-th thir ird d
of
the the
population -- that is, 50 million people -- live in acute poverty, maki making ng pove povert rty y redu reduct ctio ion n a main main conc concer ern n for the the coun countr try. y. In contr contras ast, t, the the troub trouble led d islan island d natio nation n of Sri Sri Lank Lanka a prov provid ides es a positive
difference,
standing
out
as
a
model
of
human
development in south Asia. Says Haq , "The two main reasons of Sri Lanka's success is achieving a very low level of population growth and a high level of human development that is at equality with with the the deve develop loped ed world world." ." it achi achiev eved ed this this mira miracle cle expl explain ains s Ketheswaran Loganathan Loganathan , work senior analyst analyst Dr Ketheswaran workin ing g with with SriSri-
Lankan research body, "The high literacy rate among women and increase in women's participation in the job market especially in the private sector has delayed the marriage age for women." This primary factor, he says has given a boost to family planning here, elabo elabora rati ting ng that that,, “eco “econo nomi mic c press pressur ure e and and the the decli decline ne of the the extended family, this has forced couples to restrict the number of children to one or two."
ILO Direct Director-Ge or-Gener neral al Mr. Somavia Somavia (2005), (2005), reports that there is
need need for for deve develo lopm pmen entt of comp compre rehe hens nsiv ive e stra strate tegi gies es aimed aimed at givin giving g youn young g peop people le a chan chance ce to maxim maximize ize their their prod produc ucti tive ve potential potential through decent employment, employment, as well as for an increase increase
19
of international aid for the most helpless youth in order to bring them back into the fold of a civil society. It is recognized within the the
UN
as
well
as
other
internation ional
organizatio tions
and
governments that only through decent employment opportunities can young people get the chance to work them out of poverty.
Sarid (2006) repo report rts s that that the the numb number er of youn young g unem unempl ploy oyed ed
increased from 74 million to 85 million over the past ten years, there were more than 300 million youth who were living below the US $2 per day poverty line, notes a report by ILO. The highest unemployment rate was observed In the Middle East and North Africa: 25.7 %. In Sub-Saharan Africa 18.1 %; South East Asia and the Pacific 15.8 per cent. The European Union prides itself with 13.1 13.1 per per cent cent and and East East Asia Asia with with only only 7.8% 7.8% (off (offic icia iall lly) y).. It is important to note that in the developing regions, such as South Asia, young women face disproportionate challenges challenges in the labor market. This is mainly due to cultural traditions, lack of work opportunities, and a tendency of labor markets to drop young women more rapidly than men when fewer job opportunities are available. There is also a harsh increase in the number of young peop people le who who are are neit neithe herr in empl employ oyme ment nt nor nor in educ educat atio ion, n, in Cent Centra rall and and East Easter ern n Euro Europe pe 34 perc percen entt of yout youth h falls falls in this this category. In sub-Saharan Africa the rate was 27 percent, while in
20
Central and South America it was 21 percent. In the developed countries, on the other hand, that number was only 13 percent.
Inte Intern rnat atio iona nall
labo laborr
orga organi niza zati tion on,,
ILO
(200 (2006) 6)
fin finds
that
unemployment has reached to new heights despite of the healthy econ econom omic ic grow growth th.. Unem Unempl ploy oyme ment nt is incre increas asing ing at high high rate rate especially youth are mostly effected by this. ILO says that the rapid increase in the GDP of the most of the economies could not turn that economic growth into job creation and increasing of the wages. No doubt that world’s GDP growth is increased to 4.3% but even this could not decrease the unemployment rate. This shows that even economic growth is not sufficiently addressing globa globall emplo employm ymen entt need needs s and and the the worl world d is facin facing g glob global al job job crises and deficit in well-mannered working which could not be cure by itself. There were 191.8 million jobless people people at the end of 2005 an increase of 34 people million since 1995 (Appendix B).The The main ain prob proble lem m is that that more ore than than half half of the the worl world’ d’s s
unemployed is youth while youth makes up
of the working
age population . The report says that only in service sector the
empl employ oyme ment nt oppo opport rtun unit ities ies incre increas ased ed with with one one exce except ptio ion n i.e. i.e. Middle East and Africa. It says that if service sector continued to grow grow on like like this this it will will soon soon over overta take ke agri agricu cult ltur ure e sect sector or in providing employment opportunities.
21
Somavia,, ILO (2006) (2006) said, Mr. Somavia said, in many many countr countries ies,, agricu agricultur ltural al
workers are leaving a life of rural poverty in the hope of finding something better in the city but end up little or no better off iN informal laboring jobs or petty trading. Economic shocks as well as natural disasters recently also hit those areas who are already poor. This report suggests concept that poverty can only be reduced by the rout of more and better job in the economy.
It is quite clear from these articles that unemployment always remained a serious problem in the way of development of any country and it also is affecting the overall world development programs. The cost of this for a nation is not only the lost GDP (output),and
welfare
expenses
paid
for
the
survival
of
unem unempl ploy oyed ed but but also also the the incr increa ease se in crim crime e and and anti antiso soci cial al behavior which in turn badly effect industrial and trade activities and and crea create te furt furthe herr more more unem unempl ploy oyme ment nt and and pove povert rty y in the the society. Serious political and governmental attention is needed to reduce its impact on the society. Suggestions are discussed in next section of the paper.
22
3.1 Global causes of unemployment Unemployment is not the result of any one cause. It makes its appearance in a great variety of circumstances, some in personal factors, some in economic changes, and some in legislative and regulatory conditions. Throughout the year some workers may appear in the labor market and then withdraw. Students work during the summer and return to school in September. Building and construction activities, logging and lumbering, slaughtering and meat packing are very seasonal and give rise to a temporary unemployment unemployment . Simi cons conside idera rabl ble e amou amount nt of temporary Similar larly ly,,
indus industr tria iall and and tech techno nolo logi gica call chan change ges s may may force force work worker ers s to readj readjus ustt and and relo reloca cate te.. Jobs Jobs,, wage wages, s, and and work workin ing g cond conditi ition ons s always point the way.
Unem Unempl ploy oyme ment nt can can be cons consid ider ered ed as phen phenom omen enon on driv driven en by mult multip iple le caus causes es.. Unem Unempl ploy oyme ment nt migh mightt be attr attrib ibut uted ed to, to, for for example, example, deficient deficient aggregate aggregate demand, demand, high
population population growth growth
rate, rate,
prog progre ress ss,,
discr discrim imina inati tion ons, s,
illit illiter erac acy, y,
tech technic nical al
mark market et
imperfections, utility maximising decisions of workers, individual sear search ch beha behavi viou our, r, the the rise rise and and fall fall of indu indust strie ries, s, trad trade e union union behaviour, seasonal nature of jobs etc., or combinations of these factors. This makes clear that unemployment is an instance in 23
which more than one cause is involved in the production of the phenomenon and that total unemployment is an intermixture of effects of these singular causes.
Another important cause of unemployment is that it is good for big busi busine ness ss.. The The highe higherr the the rate rate of unem unempl ploy oyme ment nt the the more more peop people le ther there e are are looki looking ng for for work work,, the the more more peop people le ther there e are are looking for work then the more likely they are to put up with poor working conditions and poor pay, they more willing they are to put up with poor conditions and poor pay the easier it is for big businesses to grow as they do not need to worry as much about work worker er strik strikes es and and union unions. s. This This expl exploit oitat atio ion n of the the work worker ers, s, allo allows ws busi busine ness sses es to sack sack the the mone money y they they shou should ld real really ly be paying out and use it to further there own goals. Less opportunities opportunities for women to take part in labor force in Asian coun countri tries es is also also cont contrib ribut utin ing g to incre increas ase e the the over overal alll rati ratio o of unemployment. So we can can say say that that each each ty type pe of unem unempl ploy oym ment ent can can have have different and more than one causes but the need is to control these situations.
3.2 Costs and effects of unemployment
24
Unemployment is potentially very damaging. Its knock-on effects are far reachin reaching, g, destro destroyin ying g the lives lives of countle countless ss individ individual uals, s, parents and children and severely affecting a country’s economy. For For
the the
indi indiv vidua idual, l,
unem unempl ploy oym ment ent
can can
be
psyc psycho holo logi gica call lly y
damaging, eroding a person’s self-esteem. Unemployment in the family context will cause added stress. In many countries the common scenario is that unemployment takes families in to the poverty poverty trap. In anxiety parents send their children out in search for work. In most instances this leads to cheap labor , begging trading g on the street streets s and even prostitution and criminal and tradin
activity. Without education these children are without hope of finding a decent job in the future. This is how child labor birth takes takes plac place. e. This This cycl cycle e of depr depriva ivatio tion n cont continu inues es thro throug ugh h the the generations. Unemployment damages the economic and social stability of any soci societ ety. y. Soci Societ etie ies s whic which h fail fail to prov provid ide e gain gainfu full and and secu secure re empl employ oyme ment nt to their their peop people le invi invite te polit politic ical al inst instab abili ility ty,, socia sociall unrest and economic insecurity. The link between unemployment and crime has also been well established. A rise rise in unem unempl ploy oyme ment nt will will seri seriou ousl sly y dama damage ge a coun countr try’ y’s s economy. economy. Unemploymen Unemploymentt represents represents a terrible waste of national national resources. The goods and services which the unemployed might have produced are lost for ever. With rise in unemploymen unemploymentt GDP gap between between potential potential and actual actual GDP increases. increases. What is more, more,
for for the the Stat State e that that the the cost cost of unem unempl ploy oyme ment nt does does not not only only
25
consist of the loss of potential income-derived from taxation, it also includes the expenditure involved in social security benefits and variou various s forms forms of subsid subsidizat ization ion to assist assist in mainta maintainin ining g at leas leastt a mini minimu mum m leve levell of huma human n dign dignit ity y for for thos those e affe affect cted ed.. Employment is also directly related to all industrial and trade activities. These activities slow down when there is a high level of unemployment but increases when it is low.
3.3 Situation of unemployment in Asian countries
Sou South
Asia' ia's
labor
market
is
characterize ized
by
constant
unemplo unemployme yment nt and undere underemplo mploymen yment t , espe especi cial ally ly amon among g the the
youth and the educated; working poor who do not get sufficient wages to get out of poverty; working children; and women who face discrimination across the labor market, reflecting prevailing social attitudes. World
Trade
Orga rganiza ization ion
(WTO)
has
fai failed led
to
generate
employment in South Asian region. South Asia's unemployment levels have raised from 2.9 per cent in 1995 to 3.4 per cent in 2001 (offic (officia ially lly)) and and the the annu annual al empl employ oyme ment nt grow growth th rate rate has has
come down during the second half of the 1990s as compared to the first half. Data Data from from the the Asia Asian n
Devel evelop opme ment nt Bank ank
(ADB (ADB))
show show that that
unempl unemploym oyment ent has increas increased ed in Pakista Pakistan, n, Bangla Banglades desh h and the
26
Maldives, while it has decreased only in Sri Lanka during this period. Though the ADB data do not report India's unemployment rates,
the
Economic
Survey
of
India
shows
that
the
unemployment rate increased from 5.99 per cent in 1993-4 to 7.32 per cent in 1999-2000.
Unemployment rates, 1999-2001 (%) Countries
Rates
Bangladesh Bhutan Maldives India Nepal Pakistan Sri Lanka
3.3 1.4 2.0 7.3 1.1 7.8 8.2
Table 1 .Source: ILO
9 8 7 6 5
Uem ployment ployment rate
4 3 2 1 0 Banglade s h
India
Pak is t an
Sr i Lank a
Figure 1
27
Ne pal
The The figu figure res s reve reveal al that that in most most Sout South h Asia Asian n coun countr trie ies s the the empl employ oyme ment nt situ situat atio ion n has has wors worsen ened ed in the the post post-W -WTO TO peri period od.. Employment generation in South Asian countries has so far not benefited much from the WTO. Pakistan current unemployment rate in 2003 officially remained same 7.8% but unofficial rate of unemployment is too high. The employment challenge in South Asia is highly discriminatory agai agains nstt
women omen..
opportun tunities ies
is
Women omen's 's best
limi limite ted d
reflec lected
in
acce access ss the
to
gap
empl employ oym ment ent between
the
unemployment rates of men and women, which shows women are 3.5 times more likely than men to be unemployed in Pakistan.
Male & female unemployment in South Asian countries (%) Countries Female Male F/M ratio Bangladesh Maldives India Nepal Pakistan Sri Lanka
2.3 2.7 10 .7 14.9 16.2
2.7 1.6 7 1.5 4.2 7.1
28
0.9 1.7 1.4 0.5 3.5 2.3
Table 2. Source: ILO
15 10 fem ale unemployment (%) (%) 5
male unem ployment ployment (%)
0 Pak is is ta tan
In di dia
Figure 2
Two-thirds of South Asian women are employed in agriculture or
agriculture-rel agriculture-related ated activities. activities. They work in various various roles such as agricultural laborers, managers of homesteads, and sometimes allowed equal equal even even as land landow owne ners rs.. Howe Howeve ver, r, they they are are not not allowed opportunities in this sector in access to credit and inputs and
face discrimination in wages.
3.4 Situation in Pakistan Many changes have been made to define the meaning of labor force and employment in Pakistan— The Population Census of 1951 defined the labor force as all persons of 12 years and above
who who are are selfself-su supp ppor ortin ting, g, part partial ially ly selfself-su supp ppor ortin ting g or seek seekin ing g works. In 1961 , its definition definition was changed to include all those of ten years and above who were working for profit or wages or
helping their family members. Not only the change lowered the 29
age age but but it also also incl includ uded ed the the unpa unpaid id fami family ly memb member ers s in the the Labor Survey Surveys s defin employ employed. ed. Today, Today, Labor define e emplo employm ymen entt as "all persons of ten years of age and above who worked at least one hour during the reference period [the year] and were either ‘paid employees’ employees’ or ‘self employed." Based on this definition, the total
numb number er of empl employ oyed ed labo laborr forc force e in 1999 1999 is estim estimat ated ed at 36.2 36.2 milli million on.. For For insta instanc nce, e, base based d on a popu popula latio tion n of 134. 134.5 5 milli million on today and a participation rate of 28.7 per cent, the total labor force force in Paki Pakist stan an come comes s to 38.6 38.6 milli million on of which which 36.2 36.2 milli million on were employed. This also shows that only 2.4 million persons were unemployed in the country which reflected an affordable unemployment rate of 6.1 per cent. In fact, unemployment is a much more serious problem than the official statistics show. If the
unemployment
rate
of
6.1
per
cent
is
correct,
the
empl employ oyme ment nt rate rate is an idea ideall 93.9 93.9 per per cent cent.. Thos Those e who who know know Paki Pakist stan an,, and and ther there e are are many many,, find find this this high highly ly unpa unpala lata tabl ble. e. Unemployment in Pakistan today is widespread at all levels. It does not spare the highly qualified professionals any more be they doctors, engineers and MBAs. It hurts the illiterates, nonskilled, skilled, and educated and professionals alike. Most of the jobs created and advertised are aimed at the highly qualified professionals whose share in the total employment is just 3.6 per cent. cent. Ther There e are are little little or no vaca vacanc ncies ies adve advert rtis ised ed for for the the two two biggest biggest occupa occupation tional al groups groups— — skilled skilled agricu agricultur ltural al and fishery fishery
30
work worker ers s whos whose e shar share e is 36.8 36.8 per per cent cent and and the the elem elemen enta tary ry or unskilled workers whose share is 22.9 per cent.
(1999) Table 3 Source economic survey 1989-1999
Legislators, senior officials and managers Professionals Technicians and Associate Professionals Clerks Service Workers and Shop and Market Sales Workers Skilled Agricultural and Fishery Workers Craft and Related Trade Workers Plant and Machine Operators and Assemblers Unskilled Total
3.1 m
8.6%
1.3 m
3.6%
1m
2.8%
1.1 m
3%
2.8
7.7%
13.3m
36.8%
3.6 m
9.9%
1.7 m
4.7%
8.3 m 36.2 m
22.9% 100%
3.4 Role of Pakistan Government
The government is trying to reduce the unemployment rate in country. ‘Rozgar’ schemes were launched by the Prime Minister Benazir Bhutto in 1989 and in 1994 and her predecessor Nawaz Sharif
launched Yellow Cab scheme in 1992. However these schemes coul could d not not cont contri ribu bute te a lot lot due due to many many reas reason ons. s. One One is the the 31
complicated complicated procedure procedure especially especially intensive intensive verification, verification, which created hurdles for a common man. The Yellow Cab scheme was drifted by the elite class, which had their sources in the banks. After taking the cars as taxi in their name, they converted them into private cars and most of those deserved to get benefit from thi this
scheme
could
not
do
it
due
to
len lengthy
procedures,
guarantees and collateral formalities. Unde Underr
Prim Prime e Mini Minist ster er's 's Self Self Empl Employ oyme ment nt Sche Scheme me in 1999 1999,,
diff differ eren entt
Bank Banks s
and and
Smal Smalll
Busi Busine ness ss
Fina Financ nce e
Corp Corpor orat atio ions ns
extended loans to unemployed youths and skilled professionals with with diploma diploma/de /degre gree e and busines business s experie experience nce.. Loans Loans ranging ranging from from Rs.1 Rs.10, 0,00 000 0 to be Rs.5 Rs.500 00,0 ,000 00 for for smal smalll busi busine ness ss and and from from Rs.5 Rs.500 00,0 ,000 00 to Rs.5 Rs.5,0 ,000 00,0 ,000 00 for for smal smalll indu indust stri ries es etc. etc. Smal Smalll Business
Finance
Corporation
played
role
in
reducing
unemployment. Up to March 1999, the Small Business Finance Corporation ion
has
sanction ioned
Rs.2,20 ,208.4
millio lion,
agains inst
amounting to Rs.1,551.95 million have been disbursed to 9,383 persons. The SBFC has generated employment for 28,149 persons under the Prime Minister's Self-Employment Scheme up to March 31, 1999. A Small and Medium Enterprises Development (SMEDA) has been been setu setup p for grow growth th and and deve develop lopme ment nt of selfself-em empl ploy oyme ment nt schemes in Pakistan
32
During the year 1998 about 104,000 persons have been sent abroad for employment under Govt. overseas employment schemes. rece recent ntly ly
laun launch ched ed
selfself-em empl ploy oyme ment nt
scheme in collaboration with National Bank of Pakistan (NBP) offers self employment opportunities especially to youngsters for sett setting ing up smal smalll scale scale ente enterp rpris rises es such such as smal smalll fixed fixed phon phone e PCO, mobile PCO, transport rickshaw (Qingqi), Qingqi for goods delivery and small Utility Stores. It is for the poorest of the poor and provides employment opportunities to the unemployed youth. It aims aims to targ target et abou aboutt 2.5 milli million on unem unemplo ploye yed d indiv individu idual als s in three to five years through simplified financing by the NBP. Unfor fortunately comp compli lica cate ted d
Preside ident proc proced edur ure. e.
‘Rozga zgar’ Like Like
the the
scheme pas past
has such such
the
same
empl employ oym ment ent
schemes, this scheme also has the condition of two guarantee witnesses who will testify certificates and viability of the loan seeker as mandatory, which is a difficult task for a poor common indi indivi vidu dual al (mal (male e or fema female le). ). The The othe otherr opti option on is to prov provid ide e evidence of applicant’s property. If someone has ownership of property property then he/she he/she doesn’t doesn’t need such a small amount in shape of loan loan to star startt any any litt little le busi busine ness ss.. The The sche scheme me also also has has a condition of two personal references as compulsory. One of the majo majorr conc concer erns ns is that that a seco second ndar ary y scho school ol cert certif ific icat ate e is a prerequisite for a candidate that means middle grade or illiterate
33
youth or unemployed people cannot benefit from this scheme at all.
4. Suggestions and conclusions The growing human poverty challenges faced by Pakistan need to be addressed through integrated policies and approaches at individual and collective levels. Efforts on the part of national governments, supported by the international community, can be complemented for this. Civil society can play its role through capacity building to get rid of the root-causes of unemployment and poverty. Though complicated phenomena, poverty can be addressed through adoption of multidimensional approaches. First of all, real data should be collected to project real state of poverty instead of false figures. This data can help devise plans and strategies to address the issues around growing poverty and to reduce this to maximum possible levels as defined in the Millennium Development Goals (MDGs).
Unemployment and poverty, both cannot be addressed though such short-sighted short-sighted and politically politically motivated motivated apparent apparent measures. measures. If we really want to do this then, we have to reform our financial and administrative structures and have to change the mindset tuning this in terms of the people’s security that includes their 34
food food secu securit rity, y, job job secu securit rity, y, pers person onal al secu securit rity y and and secu securit rity y of movement. If we continue with huge spending on debt servicing and and
defe defens nse, e, we
can can
prov provis isio ions ns to addr addres ess s
hard hardly ly allo alloca cate te suff suffic icie ient nt budg budget etar ary y the the
gian giants ts of grow growin ing g
pove povert rty y
and and
unemployment. We need to recognize potential of our people and look look for for opti option ons s and and poss possib ibil ilit itie ies s that that can can dive divert rt our our huge huge budgets from debt serving and defense to human development and poverty eradication, and job creations. To meet the challenge of unemployment, we need to concentrate on resour resource ce mobiliz mobilizatio ation n for the social social sector sector develo developme pment nt to crea create te more more oppo opport rtun unit itie ies s for for educ educat atio ion n for for all all chil childr dren en as mandated
in
MDG-2
which
demands
to
ensure
childr ldren
ever everyw ywhe here re to be able able to comp comple lete te a full full cour course se of prim primar ary y education. More over we need to invest in higher scientific and technical education. In this way, Pakistan as a developing state may may
prod produc uce e
suff suffic icie ient nt
tech techni nica call
skil skills ls
to
acce accele lera rate te
its its
econom economic ic growth growth and to positio position n itself itself to meet meet challe challenge nges s of globalization in the twenty-first century. By creating more jobs we can reduce burden on single bread earners in families. But the job creation should be on easy and real terms and not just politically motivated whims and assumptions. If the authorities want want that that the recent recently ly launche launched d Presid President ent’s ’s ‘Rozgar ‘Rozgar’’ scheme scheme should benefit the targeted unemployed, then they have to think in real terms. We need to express political will at the highest level to make this scheme successful.
35
Government should take the following steps: 1) Govt. should make efforts to push economic growth process. For this purpose Economic Revival Package should announce for the revi reviva vall of indus industr trie ies s sect sector or,, to stim stimul ulat ate e prod produc uctio tion n and and investment. 2) Govt. should seriously try to boost exports through broadening the tax base and lowering tariffs. 3) Govt Govt.. shou should ld anno announ unce ce a pack packag age e for the the deve develop lopme ment nt of agriculture sector. 4) Beside this a number of fiscal and monetary measures should take to attract industrialists and particularly foreign investment. 5) More More Technica Technicall and Vocati Vocationa onall trainin training g faciliti facilities es should should be provided. In this way unemployed people will get the chance to enhance their skills and become able to earn reasonable income . 6)
With
a
view
to
reduce
educat educate e
unemplo unemployme yment nt ;
employment scheme should be encouraged in true manners.
APPENDIX A
36
self-
Source: ILO, Global Employment Trends Model, 2005
Appendix B 37
Source: ILO, Global Employment Trends Model, 2005 2005 figures are preliminary estimate
References 38
Syed M. Aslam , UNEMPLOYMENT — A NIGHTMARE Mohammad Shezad, Human Development in South Asia, The challenge of unemployment GLOBAL EMPLOYMENT TRENDS BRIEF, TRENDS BRIEF, January 2006, ILO Samina Khalil and Rao Noman Saleem, Applied Economics Research Centre Unemployment Situation in Pakistan 2003 Human Development Report, Globalization Fuels Unemployment in South Asia President’s employment scheme, Pakistan observer Kerstin Marx, Asia: Crisis causes massive unemployment Dr Johann Van Rooyen, The cost and causes of unemployment, ECONOMIST. Sunchild, Why is there unemployment spreading the world List of countries unemployment rate. www.wikipedia.com Source: ILO survey.
Websites www.ilo.org www.pakistaneconomist.com www.sarid.net www.pakistanobserver.com www.google.com www.wikipedia.com
39
