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Tackling Unemployment in Emerging Economies: Policy Recommendations for Pakistan

By: Aneesa Ajmal 

Unemployment is one of the major and challenging issues in emerging economies, just like Pakistan. Currently, when we look at the present scenario of Pakistan, many people are seeking job opportunities but are unable to find them. According to Trading Economics Global Macro Models and analysts’ expectations, the average unemployment rate in Pakistan was 6.42% at the end of 2022. Several factors contribute to high unemployment, such as the country’s educational system, which provides less skilled and limited exposure to technical education. Other contributing factors include the lack of investment, terrorism, corruption, discrimination, absence of a proper merit system, gender discrimination, lack of industrial development and growth, and the ineffective policies of the government, among others.

In the year 2022, according to data from the Pakistan Institution of Development Economics, 31% of youths, including both genders with professional degrees, were unemployed. To address unemployment, the government of Pakistan must implement policy recommendations to control and reduce it.

Foster private and public sector investment

Boosting the private sector, more encouragement to entrepreneurs, encouraging and boosting export-oriented industries, providing support to them, diversifying the industries, provide them incentives to encourage their potential as the response employment rate will increase in Pakistan. Stimulate foreign direct investment by improving infrastructure, addressing and tackling security concerns, ensuring effective policy stabilization and regulation, offering incentives, and creating an attractive climate for investors. It brings new job opportunities for expertise and new technological advancement in the industrial and agriculture sector.

Control Political turbulence

Political instability is also a major cause of economic instability and economic hindrance in Pakistan, and creates a challenging and unpredictable environment for businesses; most of the economic projects are directly and indirectly related to government policies, due to instability in a government project, laws, orders are not correctly implemented and unable to ensure security for domestic and foreign investors. By strengthening government institutions such as legislation, electoral bodies, judiciary and promoting the rule of law, accountability, and transparency, and ensuring that all the institutions work independently. Strengthening and facilitating regional cooperation among the neighboring countries that helps us to address the conflict and will reduce the external influence within Pakistan.

Fiscal policy

Increasing government spending in infrastructure, and in the entire project related to public improvements such as education, healthcare, and other sectors to create jobs directly and indirectly. Provide tax incentives and tax dispensation to businesses that create jobs or invest in specific sectors to encourage private sector and public sector investment and job creation. Implementing social welfare programs such as unemployment insurance to provide temporary support to individuals and help them transition back into employment through unemployment benefits, skills training, and job placement services. Creating a business-friendly environment by implementing favorable income and business tax policies, and reducing bureaucratic hurdles to attract foreign direct investment, stimulate entrepreneurship, and broaden job growth.

Expansionary Monetary policy

In the case of Pakistan, when there is an expansionary monetary policy it’s easy to borrow money, people spend more money on investments with lower interest rates which will increase the aggregate demand of the business cycle and ultimately decrease the cyclical unemployment. Lower interest rates encourage businesses to invest, expand, and create job opportunities. This facilitates access to credit for businesses, promoting their operations and investments, which in turn lead to job creation. Maintaining a competitive exchange rate can boost exports, stimulate economic growth, and generate employment in export-oriented sectors.

Gender discrimination

Gender discrimination restricts the opportunities and resources for individuals. On the economic forum, according to the UN program women account for only 22.63 % of the labor force while men contribute 84.79% of the labor force. According to the Global Gender Gap Index Report 2018, which was released by World Economic Forum Pakistan is the second worst country regarding gender discrimination out of out of 148 counties. Disintegrate vocational segregation by encouraging diversity for both genders and equal representation across all enterprises. Implementing and enforcing equal pay policies to ensure fair compensation regardless of gender. Alleviate discriminatory policies at the time of hiring; hiring practices must be through impartial and transparent recruitment processes and diversity promotions. Facilitate the work-life balance for the female through policies like flexible working arrangements and affordable and manageable childcare options. Encounter workplace harassment and discrimination through strict anti-discrimination policies, proper rule of law for harassment, fostering an inclusive environment for all, and fostering a culture of respect with authorized implementation. The establishment of the legal protection law, and prosecution mechanism, spread educational awareness for both against gender discrimination.

Embolden export-oriented industries

Promote export-oriented industries by looking at the world’s market demand, and diversify the economy to create more job opportunities. Provide support and encouragement by providing incentives to the industries which have export potential, can boost employment and foreign exchange earnings, and overcome the balance of payment crisis. Growing export increase the revenue and profit for the country, that for the capital investment. Higher capital investment accelerates productivity.

Anti-corruption policies

Corruption is one of the most persistent, complex, and multifaceted problems in third-world countries like Pakistan, where it had permeated government institutions. Implement laws and strengthen anti-corruption institutions such as National Accountability Bureau for effective legislation, transparency, and accountability to investigate and to prosecuting corruption cases. Implementing anti-corruption measures in Pakistan would help the investment climate for businesses because the transparent environment attracts investors. Fair public service resources allocation, and distribution, fair educational and professional competition.

Development of export-competent industries: Export-oriented industries help us to generate employment such as textile industries along with other industries that require labor to work and on the other hand it also generates revenue and then fulfills the international market demand. Export-oriented materials in Pakistan such as cotton, food material, and leather. Production of export-oriented industries with value addition, and good quality to the production product is necessary to make product internationally competent. In Pakistan, there is a need for technological advancement and skilled labor production. When there is more outflow of export products, then there will be higher foreign exchange earnings in Pakistan. When more revenue is collected, it will stabilize the economy, induce the government to invest in the project, cope with the balance of payment crisis, and invest in the social welfare program, furthermore, it will generate employment.

 Conclusively, unemployment in Pakistan is a significant, emerging, and the most of challenging issue that requires focused attention and comprehensive policy measures. Effective policies and strategies can be implemented to address this issue and create a more inclusive labor, and product demand market. Addressing unemployment requires collaborated efforts among various stakeholders, government, public, and businesses with continuous monitoring, policy formation regarding present scenarios of Pakistan, and evaluation of policies. By adopting a comprehensive approach that combines macroeconomic policies Pakistan can make momentous progress in reducing unemployment and fostering inclusive economic growth and development for the betterment of its public.


The writer is a student of National Defence University Islamabad. She can be reached at [email protected]

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