Unemployment:

The unemployment level is defined as the labour force minus the number of people currently
employed

The labour force is defined as the number of people employed plus the number unemployed but seeking
work. The participation rate is the number of people in the labour force divided by the size of the adult
civilian non-institutional population (or by the population of working age that is not institutionalized).

The non-labour force includes those who are not looking for work, those who are institutionalized and
those serving in the military.

The unemployment rate is defined as the level of unemployment divided by the labour force. The
employment rate is defined as the number of people currently employed divided by the adult
population (or by the population of working age). In these statistics, self-employed people are counted
as employed.

When looking at the overall macro economy, several types of unemployment have been identified,
including:

Frictional unemployment — this reflects the fact that it takes time for people to find and settle into new
jobs. If 12 individuals each take one month before they start a new job, the aggregate unemployment
statistics will record this as a single unemployed worker. Technological change often reduces frictional
unemployment, for example: the internet made job searches cheaper and more comprehensive.

Structural unemployment — this reflects a mismatch between the skills and other attributes of the
labour force and those demanded by employers. If 4 workers each take six months off to re-train before
they start a new job, the aggregate unemployment statistics will record this as two unemployed
workers. Technological change often increases structural unemployment, for example: technological
change might require workers to re-train.

Natural rate of unemployment — this is the summation of frictional and structural unemployment. It is
the lowest rate of unemployment that a stable economy can expect to achieve, seeing as some frictional
and structural unemployment is inevitable. Economists do not agree on the natural rate, with estimates
ranging from 1% to 5%, or on its meaning — some associate it with "non-accelerating inflation". The
estimated rate varies from country to country and from time to time.

Demand deficient unemployment — In Keynesian economics, any level of unemployment beyond the
natural rate is most likely due to insufficient demand in the overall economy. During a recession,
aggregate expenditure is deficient causing the underutilization of inputs (including labour). Aggregate
expenditure (AE) can be increased, according to Keynes, by increasing consumption spending (C),
increasing investment spending (I), increasing government spending (G), or increasing the net of exports
minus imports (XM). {AE = C + I + G + (XM)} (source: wikipedia)
Why unemployment in economy exists:

In the set up of a modern market economy, there are many factors, which contribute to unemployment.
Causes of unemployment are varied and it may be due to the following factors:

* Rapid changes in technology

* Recessions

* Inflation

* Disability

* Undulating business cycles

* Changes in tastes as well as alterations in the climatic conditions. This may in turn lead to decline in
demand for certain services as well as products.

* Attitude towards employers

* Willingness to work

* Perception of employees

* Employee values

* Discriminating factors in the place of work (may include discrimination on the basis of age, class,
ethnicity, color and race).

* Ability to look for employment

Broadly speaking the above factors may be categorized into the following:

(I) Cyclical Unemployment

Cyclical unemployment goes hand in hand with the business cycle. Higher the GDP, lower will be the
cyclical unemployment at the peak of the business cycle and the vice versa is true when the economy is
in the trough of the business cycle. If cyclical unemployment rate stretches for an extended period, it
may cause irreparable damage to the labor force in the country.

(II) Structural Unemployment

It is a well-known fact that everyday new products are being launched in the market. As a result, the
demand for certain goods and services also changes. This leads to increase in unemployment rate in
certain sectors of the economy and creates jobs in yet others. Under these circumstances, re
employment may be possible if the worker relocates or migrates to other sectors (in demand).

(III) Agricultural Activities

It has also been observed that if there are undulations in the agricultural sector (due to factors like low
production, drought, famine or natural disaster), the effects are felt in agribusiness. This may also be
regarded as one of the factors in unemployment.

(IV) Hard Core Unemployment

Hard core unemployment usually results when a worker is disabled and is not in a position to work. The
worker may also give up his job after a few days due to dissatisfaction with the wage.

Unemployment at any given point of time may be either due to one of the factors mentioned above or a
combination of several factors (mentioned above).

It has also been observed that if the labor market in the economy does not work in an optimum manner,
it leads to unemployment. There are other factors, which point at the tempo of an economic activity in a
region.

Measures For Reducing Unemployment Rate

Framing economic policies, improving labor mobility, assisting in developing enhanced work habits are
some of the measures, which may be taken to deal with unemployment. Extending unemployment
insurance benefits is also a means of rendering financial protection to the unemployed. This system was
first introduced during the period of Great Depression (1930s).

Macro Economic Stabilization Policy

In order to cater to the needs of the unemployed, the government has introduced the macro-economic
stabilization policy, which aims at providing financial assistance to the workers till the time of recovery in
the economy.

Variables like employment level, unemployment level, labour force, and unfilled vacancies are called
stock variables because they measure a quantity at a point in time. They can be contrasted with flow
variables which measure a quantity over a duration of time. Changes in the labour force are due to flow
variables such as natural population growth, net immigration, new entrants, and retirements from the
labour force. Changes in unemployment depend on: inflows made up of non-employed people starting
to look for jobs and of employed people who lose their jobs and look for new ones; and outflows of
people who find new employment and of people who stop looking for employment.

Unemployment in Pakistan:
15.2% (2009 est.)
13.6% (2008 est.)
note: substantial underemployment exists

Year Unemployment rate Rank Percent Change Date of Information

2003 7.80 % 119   2002
2004 7.70 % 122 -1.28 % 2003
2005 8.30 % 75 -7.79 % 2004 est.
2006 6.60 % 65 -20.48 % 2005 est.
2007 6.50 % 72 -1.52 % 2006 est.
2008 5.60 % 71 -13.85% 2007 est.
2009 7.40 % 92 32.14 % 2008 est.
2010 15.20 % 151 105.41 % 2009 est.

It can be noted from above mentioned statistics that unemployment is one of the biggest problems of
Pakistan. That person is unemployment – which is willing to work and has the ability yet cannot get
adequate opportunities. In this situation more than 30 lack people in Pakistan are unemployed and ratio
lingers around 13% to 15%.
Unemployment is one of the biggest problems of Pakistan. That person is unemployed who has ability to
do work and is willing to do work but is unable to get job opportunity. In the current situation more than
30 lakh people are unemployed in Pakistan and unemployment ratio is more than 12%.

i. The biggest reason of unemployment in Pakistan is concerned with the backwardness of agriculture
sector. Agriculture is the biggest sector of our economy that contributes 20.9% to GDP and 44% people
get jobs from this sector directly or indirectly. Unemployment in this sector is from two sides.

First is due to the adoption of latest machinery and capital intensive technology. Due to this, demand for
labour has been decreased. Second is the backwardness of this sector. There is less availability of
fertilisers, pesticides, quality seeds, absence of land reforms and lack of agriculture education. Due to all
these factors agriculture sector is not expanding and there is general and disguised unemployment.

ii. Industrial sector is the second largest sector of our economy and contributes 19% to national income.
This sector should employ a large number of labor. But due to backwardness it is employing a small
number of people. Due to electricity breakdown already established industry is deteriorating, resulting
in the prevailing unemployment ratio.

iii. High cost and low quality are responsible for less demand for our agri and industrial items. Because of
less demand of such kinds of goods both the domestic and international producers are losing their
interest in production. That's why people are becoming unemployed.

iv. In Pakistan education system is defective. There is no educational planning. This system is producing
the stuff, which is useless in technical fields of the country. There is lack of technical and vocational
institutions. Public attitude towards education is wrong, they want to get their degrees in general and
arts subjects. Nobody can set up his own business without technical education.

v. Millions of people in Pakistan are poor. Due to poverty people are overburdened with expenditures
and their savings are very low. It is said that for the reasonable growth of economy saving rate should be
at least 25% in any country, but in Pakistan it is only 13 to 14% which is very low. Low investment level is
due to less savings, ultimately there is unemployment.
vi. In Pakistan majority of the businessmen are less educated. They do not know how to run their
businesses properly. So they become bankrupt. This factor generates unemployment on a massive level.

vii. In Pakistan there is lack of every kind of planning. There is a huge difference between the demand
and supply for labor. There is absence of such kind of planning to produce doctors, engineers, technical
experts scientists etc, according to the need of different sectors of the economy.

viii. Loadshedding of electricity is disturbing economy, especially the industrial sector. Due to less
availability and high rates of basic inputs like electricity, gas and oil etc, many industries have been
closed.

ix. In Pakistan, tax system is not satisfactory. Ratio of direct taxes is more than indirect taxes. Tax
evasion is common. Due to less income from the taxes, government cannot start developmental
projects. If there is no investment, then from where public would find jobs. On the other side if
government takes step to increase indirect taxes, it would also affect investment and ultimately
employment level.

x. Current international financial crisis is one of the biggest reason of unemployment in Pakistan and in
the whole world. This crisis originated from the banking sector of USA, UK and some European countries
and is now a global phenomena.

xi. Pakistan's population growth rate is 1.8% which is the highest in the region. Our resources are
limited. Different sectors of economy are unable to provide jobs to the growing population. So there is
unemployment.

xii. Fiscal and monetary policies are also responsible for unemployment. In view of fiscal policy, Pakistan
has less funds to invest in job providing projects. Every annual budget shows deficit. Through the
monetary policy if the government increases the rate of interest, it discourages the investors from
getting loans.

xiii. Political instability, bad law and order situation, army's interference, bomb blasts, terrorism,
inconsistent economic policies etc are the factors which are disturbing domestic and foreign investment.
Pakistan investors are taking away their money to Dubai and other countries of the world.
xiv. Due to 9/11 incident, Gulf war and the baseless allegations of terrorism the image of Pakistan has
been affected very badly at international level. So in the current scenario Pakistan has limited job
opportunities in other countries of the world.

xv. Craze for work only in government sector, instead of private sector and seasonal firms, industries are
also responsible for unemployment.

xvi. Since 1947, Pakistani rulers got loans from IMF, World Bank and many other sources. Such loans
were not utilised honestly. Current external debt of Pakistan is more than 50 billion dollar. Government
has to allocate a big amount for the repayment of loans with interest. So due to less resources for
developmental projects there is unemployment.

Copyright Business Recorder, 2009

Concluding, I would like to suggest that with proper economic planning, consistent policies of
government, better law and order situation, abolishing energy crisis, sincerity with Pakistan and by
adopting the Islamic economic system we can not only tackle the issue of unemployment but every
economic problem of our country as well.

Unemployment in India:

10.7% (2009 est.)

10.4% (2008 est.)
Year Unemployment rate Rank Percent Change Date of Information
2003 8.80 % 110   2002
2004 9.50 % 105 7.95 % 2003
2005 9.20 % 83 -3.16 % 2004 est.
2006 8.90 % 91 -3.26 % 2005 est.
2007 7.80 % 92 -12.36 % 2006 est.
2008 7.20 % 89 -7.69 % 2007 est.
2009 6.80 % 85 -5.56 % 2008 est.
2010 10.70 % 117 57.35 % 2009 est.