The unemployment woes

A few days back a local publication expressed shock over an MBA working as a waiter at KFC; a few years later you may find more educated youth doing odd jobs. Here is why.
In Pakistan, for every one percent growth in real GDP, half a percent of employment is generated, according to a World Bank study.
Though Pakistans population growth has slowed with time, its still over two percent and highest in the region. With more concentration of population amongst youth and ever increasing number of female workers joining the job market- the labour force is growing at a pace of about 3-3.5 percent per annum.
Applying simple math on World Banks findings, it can be seen that without a consistent output growth of 6-7 percent a year, unemployment rate is bound to increase.
With a 2.5 percent average growth rate in the last three years, roughly two percent of additional labour force either remained unemployed or replaced some of the existing lot.
Even with a 4 percent growth in GDP for next five years, the unemployment rate will approximately increase by one percent a year on an assumption, based on World Banks findings, that two thirds of net new entrants are being employed by the economy.
Thus, the 6 percent unemployment rate today will grow to 11 percent by 2015.
High inflationary environment, in light of average annual CPI inflation of 12.1 percent in FY05-10, is making the situation even worse. Bear in the mind that inflation is likely to remain in double digits, at least in the ongoing fiscal year.
High inflation and lower employment lead to lower purchasing power and more spending of disposable income on consumption. This eventually leads to lower savings.
Domestic savings which averaged 16.6 percent of GDP in FY02-06 have been slashed to 11.89 percent, on average, in the last four years. More worrisome is the fact that it was as low as 9.9 percent of GDP in FY10.
Thats how high inflation and increasing unemployment plagued the saving patterns of the country.
To add to the agony, global financial crisis and a weak law and order situation at home is hampering the inflows of foreign savings to plug in the much required investment - foreign savings reduced from its decade peak of 8.5 percent of GDP in FY08 to mere 2.8 percent last year.
National savings plus foreign savings equal to total investment of a country. Hence, the fall in both domestic and foreign savings is doing no good to the fate of investment, which was as low as 16.6 percent of GDP from its recent peak of 22.5 percent of GDP three years back.
In the coming years, fiscal and quasi-fiscal deficits and their financing from domestic sources and removal of subsidies will not allow inflation to taper off to desirable levels.
On the other hand, poor governance, operational inefficiencies, corruption in public sector entities and a poor law and order situation amid falling savings-investments will check the output growth.
Unless political will is developed to plug-in the inefficiencies and the government starts generating more revenues, more and more of the countrys educated youth will either remain unemployed or will be working underemployed as waiters at foreign chains of food restaurants or, who knows, busy concocting conspiracy theories for lack of other things to do.