ISLAMABAD: Economic growth is gradually picking up to respectable levels but is still unable to absorb the surging number of job-seekers entering the labour market.
The unemployment rate is on the rise, depriving a sizable segment of the population of its livelihood and preventing the harnessing of the real potential of both manpower and natural resources for development.
According to the latest short-term IMF forecast, Pakistan’s economy will grow at 5pc in FY2017 and 5.2pc FY 2018. The Fund also projects a slight increase in unemployment ratio from the current 6pc to 6.1pc in the next fiscal year. This ratio was 5.9pc in FY2015, much higher than the 5pc considered by economists as ‘full employment’. This is growth without development.
Foreign economists say that Pakistan needs a growth rate of 7-8pc on a sustained basis to absorb the increasing number of jobless and clear the backlog. That target is not within easy reach. Much depends on the quality of growth that may or may not produce enough jobs, especially when growth comes from better capacity utilisation rather than capacity expansion or greenfield projects.
Capital-intensive spending, like high tech, creates jobs for highly skilled people but squeezes the space for the blue-collared jobs. Corporates’ flexible labour policy increasingly denies a life-time career to skilled manpower. Costs are cut by outsourcing ancillary activities or by using contract labour in factories.
Underemployment and joblessness is rampant specially in rural areas leading to migration to ill-planned and over-crowded cities.
Often academic qualifications and skills development do not match the changing market demand. Human resource development is a low priority when fresh ideas and the latest technology are shaping new economic activities and trends.
Unemployment is turning into a critical issue, also because of increasing global curbs on workers’ immigration. And a job-centred development strategy appears nowhere in sight.
But for the common citizen job alone is not the only problem. A higher economic growth fuels inflation and raises the cost of living which becomes more problematic since most people can’t make a comfortable living if their incomes do not rise commensurately; just to maintain the level of inflation-adjusted real wages from falling.
The IMF has forecast a spike in inflation from 2.9pc in FY2016 to 4.3pc and 5pc in FY2017 and FY2018 respectively. The rising inflation rates are likely to build a case for hiking interest rates and raise cost of commodity production on account of increased financial charges. This would mean more inflation and hence, greater suffering for low-income groups.
And finally, as it appears, the bias for indirect taxes, which places a heavy burden on the common citizens, is unlikely to change in the next federal budget, but for some ‘populist’ measures on the periphery in view of general elections due in first part of the next year.
Popular-ism has become a taboo in dominant economic vocabulary. Gone are the days when sanctity of the ballot box and the electoral mandate was anchored on the strong belief that the voice of the people is the voice of God.
When seen in the back drop of the CPEC — a game changer and a catalyst for economic growth— the three variables — jobs, inflation and indirect tax burden — raise a pertinent question: how will the fruits of the economic progress be shared by the common citizen?
No doubt the CPEC will help make the domestic economy somewhat robust and stronger while many businesses will flourish; it will also spur regional cooperation but create more temporary jobs than permanent ones. The common citizen is largely left with no option but to fend for his livelihood.
Unable to provide as many jobs as needed, the incumbent government takes pride in significantly increasing the amount and the number of poor who receive dole-outs from the national exchequer.
While inequality had never been challenged as much an inequity or injustice, it is seriously questioned when it reaches an intolerable level and starts engineering a recession. If a reasonably good economic growth rate does not produce enough jobs, it is time to review economic policies to remedy the situation.