Pak Economy: Growth without jobs-By Jamil Nasir

DESPITE the much-touted stellar growth of the past few years, the economy has failed to absorb the teeming millions of an unemployed workforce.The Economic Survey issued every year invariably shows positive growth in all three major economic sectors i.e. manufacturing, agriculture and services, but this growth seems to have bypassed the unemployed workers especially those in the category of the low-skilled, the semi-skilled, the illiterate and the poor. This phenomenon has aggravated the sufferings of the poor segments of society.

Indeed, things have reached a stage where reports of suicides frequently appear in the press as a stark manifestation of the fact that society is unhappy and discontented and a volcano of social upheaval may erupt anytime if concrete measures are not taken to change the current trend and contours of economic growth.

Our economy seems to be suffering from ‘jobless growth’, meaning that the economy is growing but without any jobs having been generated or without an increase in jobs that is commensurate with the rate of economic growth.

A number of causes are attributed to jobless growth. It is argued that increased productivity through the use of capital-intensive manufacturing accelerates economic growth without job creation. Jobless growth may also stem from structural changes in the labour market, which results in unemployment. Free trade is also suggested as one of the causes of jobless growth as companies are more likely to move factories and jobs to other countries and areas to cut costs.

These general causes are not, however, relevant to every economy and country. The structural changes in the labour market and the shifting of factories are predominantly phenomena of the developed world and do not explain jobless growth in a developing country like Pakistan where the majority of the workforce, especially the low-skilled and illiterate members, is employed in the informal sector of the economy.

In the urban areas, the informal economy includes street vendors, small workshops, construction workers and people who have set up small family enterprises in their homes. In the rural areas, small tenants, agricultural labourers, artisans, people rearing livestock or poultry, etc are included among the working poor of the informal economy. This type of economy holds a dominant share (constituting some 60 to 80 per cent) of the employment sector in Pakistan.

In the area of formal manufacturing, the textile sector is considered the biggest single employment provider to the low-skilled and illiterate workers but due to the changing global dynamics of trade, this sector is losing its vibrancy and chances of saving it from the current downslide are minimal in the near future.

The same is the case with other labour-intensive manufacturing sectors like leather and sports goods. The implications of this dismal scenario in the manufacturing sector are easy to imagine from the employment angle. Not only does the formal manufacturing sector not have much potential for job creation, it is also feared that further shrinkage in employment may occur due to layoffs and closure of manufacturing units.

The agriculture sector is likely to attract investments in the coming year due to favourable trade trend over the past few years. New players in this sector will operate on the principle of profit maximisation and agriculture is likely to undergo further mechanisation. The investors will use capital-intensive techniques to extract maximum profit from their agricultural ventures.

The big land owners have either already mechanised their farms or are in the process of doing so. This phenomenon will further aggravate the unemployment issue in the rural areas as growth in agriculture will essentially be jobless growth in view of the emerging scenario.

As regards the formal services sector, it is a fact that some jobs were created in the telecom and banking sectors in the last few years but job creation in these sectors was restricted to the skilled and educated workforce. The construction sector was the only labour-intensive sector which registered reasonable growth in the past years but the boom turned out to be a transitory phase. There is no noticeable increase in other services from the perspective of job creation. It can, therefore, be assumed that there is little or no scope for employment growth in the organised sectors of manufacturing and agriculture as well as services.

This situation warrants an overview of existing strategies and economic models of growth adopted in the country. It is a common perception that existing growth strategies are biased in favour of big businesses and tend to eliminate the street traders and businesses. The policy prescription is to promote the development of labour-intensive small and medium enterprises in the manufacturing and services sector by facilitating credit access and market entry.

Jobless growth is not a desirable phenomenon as any effort to minimise the poverty levels is destined to fail unless jobs are created for the unemployed and poor. If growth does not produce jobs, then its purpose to foster development and alleviate poverty will eventually be defeated. Accordingly, there is a need for a paradigm shift — from jobless growth to inclusive growth where everybody enjoys the fruits of economic growth and income gaps are not widened between different segments of society.

Growth patterns in Japan, Korea and China are pertinent examples of inclusive growth where income gaps did not widen during the process of economic growth. During their initial stages of development, economic policies were designed to promote the labour-intensive industries which reduced unemployment in these countries.

One size does not fit all but due to heavy population pressure, it is prudent for a country like Pakistan to choose a growth pattern which is conducive to job creation by developing labour-intensive industries and enterprises. Job creation rather than economic growth per se should be the important ingredient of economic and social policymaking as the sustainability of growth rates hinges on broadening inclusiveness.



Source: Daily dawn, 19/9/2008

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