Is unemployment really Pakistan’s big issue?

In recent news, Peshawar Electric Supply Company informed the Senate that 750,000 applicants applied for just 3,200 vacancies in the power utility. For the moment, let’s ignore the question why does Pesco, one of the top 10 loss-making public-sector enterprises and the worst-performing Disco, even need to hire 3,200 people when it already had 17,000-plus staff in FY17. There is a bigger question at play here: unemployment and its measurement.

By now it is a commonly cited nugget that Pakistan’s economy needs to grow about 7 percent per annum to absorb new entrants to labour market each year. That number by the way comes from a World Bank funded study conducted about eight years ago, and as such, much like housing shortage estimates, these estimates also haven’t been revised since. As if economies are static!

Yet this country does not even measure and report unemployment and other datasets relevant to the job market on monthly basis. Nor does the central bank use unemployment estimates for its monetary policymaking. Pakistan’s academia and policy research circles also don’t frequently update the estimates of the country’s natural rate of unemployment (NAIRU) - an indicator generally considered as a rate at which a country is construed to be at full employment.

Considering that the unemployment rate at which any given country is construed to be at full employment usually lands between 5 to 9 percent depending on type and state of economy, the fact that Pakistan’s unemployment rate is at 5.7 percent as per Pakistan Bureau of Statistics’ most recent estimates for FY18, either the entire politics and sloganeering about unemployment is completely flawed and misplaced or that the unemployment data and its reporting needs to be fixed.

And this is yet another reason why Pakistan must make its statistics body strong and independent. (See also BR Research’s Free the statistics (division) published, May 2, 2019)