The Overview of Labour Market in Pakistan

Introduction

Due to lack of higher education, inexistence of a well-designed and incorporated vocational training system, lack of collaboration between industry and higher educational institutions, lack of efficient and consistent social protection and inaccessibility to education, labour market in Pakistan enters the market with general skills and insufficient firm or industry specific skills. In a broader perspective overall, low levels of education and enrollment in educational and vocational institutions have led to skills gaps and shortage of skill in labour market.

Literature Review

In the 60s Pakistan used to be an agricultural economy which did not require highly skilled labour for a long time. Due to urbanization, lack of appropriate technology, inefficiency of agricultural development policies economy has shifted to service sector as the largest contributor to GDP. Agriculture, Industry and service sector are the three major sectors of economy. Contribution to GDP from 1960-2015 Skill level of the labour force: Agriculture sectors remains the largest employer of the labour force with a contribution of 43. 48%, 14. 16% in manufacturing and 14. 58% in wholesale and retail trade (service sector). In the formal sector only 1. 66% of the labour force is employed as highly skilled managers, 4. 55% as professionals and 2, 79% technical and associate professionals. 85. 55% of these managers and professionals contribute to the economy in the service sector.

Education level of Labor Force

In Pakistan 59. 99% of the population is literate and 40. 01% of the population is illiterate. Literacy is defined as the ability of a person to read and comprehend text from a newspaper and the ability to solve basic addition or substation. Out of the literate population (40. 01%) only 5. 02% people have higher educational degrees in fields of engineering, medicine, law, science etc. We can say that only 5. 02% of the literate population has high level of skills. It has been observed that the labour market doesn’t possess skills (what skills) that are required for economic development. Current employment and economic development opportunities in Pakistan require increased level of knowledge and highly skilled labour. Level of education is low in Pakistan to begin with, moreover the educational institutions fail to play their primary role, i. e. developing individual knowledge-based competencies and preparing pupils for a rapidly changing world (Punjab).

Social protection in service sector

Social protection policies in Pakistan mostly cater to the formal sector and only in case of permanent illness, accident at workplace, retirement and maternity leave.

The Pension Act: Employees in the government sector enjoy some benefits in form of lump sum money as well pensions upon retiring from their jobs.

Federal Employees Benevolent Fund and Group Insurance Act: As part of this act public sector employees or their families receive cash grants in case of death, reimbursement of educational expenditure (on average 10-50% of the total expenditure is reimbursed) and a marriage grant (only for the daughters of the employees).

Workers Welfare Fund: Private establishments in the industrial sector that employ 50 or more employees and own a capital amount worth six million PKR are required to disperse 5% of the total profit made by the company in one fiscal year to the Workers Welfare Fund. This fund is then used to provide housing stipends, contributions to medical bills and for other income generating activities of the employees.

Industrial and commercial employment Act: Private Commercial and industrial establishments that employ twenty or more full-time employees for at least a period of twelve months must comply with this act. Under this act they cannot terminate a permeant employee without one-month notice in advance. Only exception to this stipulation is termination due to misconduct defined by the rules and regulations of the company. This is the only form of employment protection that is insured by law.

Minimum Wage: Wage protection in form of minimum wage for skilled and semi-skilled labor force is set to 15000 PKR ($150). Minimum wages are protected by Minimum Wage Ordinance and these wages are paid on monthly basis for 240 hours worked.

Conclusion

Labour market in Pakistan is large due to increased population. However, it is unstructured and lacks coordination of policies between formal, informal, public and private sector. Current education level and curriculum models fail to bridge the gap between demand and supply of the labour force and employer requirements. Employers require highly skilled labour force but the wages for skilled and unskilled jobs in formal sector fail to match the increased demand of highly skilled occupations. Inefficient social protection policies only aim to protect unskilled and skilled workers in the formal sector only to some extent.