The International Labour Organisation (ILO) has revealed that Pakistan’s labor market is still grappling with the far-reaching effects of the Covid-19 pandemic and economic crisis. According to the ILO’s latest employment outlook report on Pakistan, the number of unemployed individuals is projected to surge to 5.6 million in 2023, marking an increase of 1.5 million since 2021.
This dire estimate aligns with the International Monetary Fund’s (IMF) forecasted unemployment rate of 8.5 percent for 2023, a significant jump from the 6.2 percent recorded in 2021, as stated by the ILO report.
Of particular concern is the rising rate of female unemployment, historically exceeding male rates by at least 1.5 times. The report warns that the female unemployment rate could reach a troubling high of 11.1 percent.
The shrinking job opportunities and the escalating unemployment crisis threaten to set back Pakistan’s progress toward achieving decent work conditions by several decades, according to the ILO.
The ILO’s estimates indicate that Pakistan’s employment-to-population ratio in 2023 falls significantly below its pre-crisis trend line, standing at 47.6 percent. Meanwhile, the number of unemployed individuals is expected to surge to 5.6 million, representing an increase of 1.5 million since 2021.
These mounting labor market challenges are a reflection of Pakistan’s cumulative economic distress, stemming from the shockwaves of the Covid-19 crisis, the devastating floods in 2022, and exacerbated by recent macroeconomic instability.
Pakistan recently entered into an agreement with the IMF, securing a $3 billion standby arrangement (SBA) in July 2023. This arrangement aims to avert a debt default and restore investor confidence. However, the implementation of the SBA, coupled with the tightening of public finances, is expected to exert further pressure on labor market prospects, at least in the short term.
Geir Tonstol, ILO Country Director for Pakistan, emphasized the multifaceted challenges Pakistan faces, which are taking a toll on its labor market and driving increased informality and out-migration. The ILO is committed to addressing the difficulties faced by workers and struggling enterprises and finding solutions to enhance the security of livelihoods during these challenging times.
The ILO intends to strengthen social dialogue as a means of ensuring social stability and will develop integrated provincial-level inclusive recovery strategies aimed at creating decent jobs, with a particular focus on women and youth.
In 2023, Pakistan’s employment-to-population ratio is estimated at 47.6 percent, nearly two percentage points below the pre-crisis ratio recorded in 2019. Compared to a post-Covid-19, no-crisis scenario, employment figures in 2022 are estimated to be 1.8 million lower than expected. This “jobs gap” is projected to widen to 2.4 million in 2023.
With the additional challenges posed by the devastating floods of 2022 and the ongoing financial crisis, Pakistan’s economy is grappling with negative growth and mounting inflationary pressures. These factors are making it increasingly difficult for enterprises and households to withstand the economic strain.
