Unemployment crisis: Consequence of misplaced priorities

By Assadullah Channa

Pakistan is currently witnessing a sharp rise in unemployment, reaching a 21-year high of 7.1 percent in the fiscal year 2024-25, according to the latest Labour Force Survey (LFS) released by the Pakistan Bureau of Statistics (PBS).

 The number of unemployed persons has surged from 4.5 million in 2020-21 to nearly 5.9 million in 2024-25, reflecting an increase of about 1.4 million jobless individuals within just four years.

This alarming trend not only exposes the structural weaknesses of Pakistan’s economy but also highlights the strategic misallocation of resources towards security rather than sustainable economic development and job creation.

The Labour Force Survey underscores that Pakistan’s labor force has expanded significantly from 71.8 million in 2020-21 to 83.1 million in 2024-25, attributable to a demographic boom and increased labor force participation.

However, economic growth has stagnated below 3 percent for several years, insufficient to absorb the annually growing workforce of approximately 3.5 million new entrants. This mismatch between job supply and workforce growth is a primary driver of the rising unemployment rate. The hardest hit are the youth, with unemployment rates soaring to 12.9% among the 15–24 age bracket, reflecting both skill mismatches and a lack of productive employment opportunities for young people across the country.

A critical analytical perspective reveals that this unemployment crisis is a direct fallout of Pakistan’s persistent policy focus that privileges security expenditures over broad-based economic and developmental investments. Historically, Pakistan has allocated a disproportionate share of its fiscal resources to security, a legacy driven by its geopolitical environment and external threats.

While national security is undeniably important, the opportunity cost of maintaining a high resource allocation toward defense has been the underfunding of crucial sectors like industrial development, education, technological innovation and infrastructure sectors that serve as engines for job creation and long-term economic resilience.

Sectoral employment patterns corroborate this imbalance and its effects. The survey indicates a decline in agricultural employment by 4 percentage points to 33.1 percent, coupled with a slight contraction in manufacturing employment to 14.4 percent, both sectors crucial for absorbing large segments of the labor force. Meanwhile, employment growth has been seen mainly in wholesale and retail trade, which largely comprises informal and low-productivity jobs.

The dominance of informal employment accounting for more than 72% of non-agricultural jobs reflects a fragile labor market with limited social security and job stability. This pattern suggests that the economy is not structurally prepared to offer sustainable, quality employment, further entrenching economic insecurity among the working population.

Moreover, the adverse impacts of the International Monetary Fund (IMF) stabilization programs and climate-induced disasters have compounded economic pressures, constraining demand and dampening economic activities. These external shocks have underscored Pakistan’s vulnerability, which is exacerbated by internal policy failures. The IMF conditions have often necessitated austerity, limiting government capacity to invest in social and economic sectors that could generate employment. Concurrently, the escalating defense expenditure amidst these fiscal pressures diverts scarce resources from critical initiatives like vocational training, industrial modernization, and entrepreneurship promotion key to addressing structural unemployment.

Pakistan is caught in the classic “guns versus butter” dilemma, where excessive focus on security undermines the “butter” of economic development and job creation. This dynamic erodes economic security, which is fundamental for sustainable national security. Without shifting priorities to channel more resources into developmental policies, Pakistan risks perpetuating a cycle of unemployment, social discontent, and economic fragility.

The rise in average monthly wages from Rs24,028 in 2020-21 to Rs39,042 in 2024-25 is a silver lining, but it is not sufficient to offset the distress posed by widespread joblessness especially among women, whose unemployment rate stands at 10.5%, significantly higher than the male rate of 6 percent

To break out of this crisis, Pakistan must recalibrate its strategic approach to resource management. Greater fiscal discipline in defense spending combined with enhanced investment in human capital development, industrial innovation, and climate-resilient economic infrastructure is critical. Expanding access to quality education and vocational skills, integrating youth into productive employment, and fostering an enabling environment for entrepreneurship can build a diversified, resilient economy capable of providing sustainable livelihoods.

This approach demands visionary governance that prioritizes economic security as the cornerstone of overall national security, thereby ensuring that resources generate inclusive growth rather than fueling disproportionate militarization.

Pakistan’s rising unemployment is a sign of deeper economic and policy malaise. It serves as a cautionary story on the consequences of misprioritizing resource allocation at the expense of development.

Reversing this trend requires a shift in government strategy towards embracing economic productivity, social equity and environmental sustainability as inseparable pillars for national progress and stability.

The writer is an educator, based in Sindh.he can be reached on [email protected]