Employment is one of the vital indicators of an economy’s performance.Therefore, it is significant to understand the dynamics of the labor marketwhere various changes in employment due to structural shifts or differentshocks can be captured.
According to the State Bank of Pakistan’s (SBP) report, “The State ofPakistan’s Economy,” there are 1.3 million new entrants in the domesticlabor force every year in Pakistan.
Coupled with the labor market having to deal with several shocks, includingthe recent COVID-related lockdowns, made rising unemployment a real riskand a real fear for the public and government alike.
At the same time the analysis of the domestic labor market is challengingdue to the limited availability of periodic datasets, the report confessed.The primary source of information on the labor market for Pakistan is theLabor Force Survey (LFS), which was last published for 2017-18.
However, the report did gather some insights into the labor force market inthe country, such as the monthly surveys of industrial performance andemployment conducted by provincial statistical bureaus, the employmentindex from the SBP’s Business Confidence Survey, and CPI wage rate data.——————————
According to the collected employment data for the provinces of Punjab andSindh, it appears that there was an improvement in the manufacturing sectorduring the Jul-Aug FY21 period compared to the peak-restriction period ofmid-March 2020 to April 2020.
The increase in the employment index in the post-lockdown period is in tunewith the recovery observed in large scale manufacturing, the report stated.The gradual ease in mobility restrictions since then explains the increasein employment in the industrial sector in these provinces.
During the initial phase of the lockdowns, as much as 10 percent of theindustrial workers lost their jobs. Gradual ease in restrictions in thefollowing months allowed some recovery. However, the industrial labormarket had been unable to regain its pre-COVID level by the end-August 2020.
In particular, the province-wise data suggests that job losses in themanufacturing sector in Sindh were higher, and the pace of recovery wasalso slower. Higher job losses in Sindh can be linked to heavy monsoondownpour and subsequent flooding especially during August 2020 in theindustrial hub of Karachi.
From a sectoral perspective, although there were job losses across theboard during the peak COVID period, they were more noticeable in the sugarand leather industries. Compared to February 2020 levels, 23.5 percent ofthe workers lost their jobs during the lockdown period in the sugarindustry.
Even after the lockdown was lifted, the sugar industry continued to postjob losses. The leather industry also saw employments levels drop duringthe lockdown period. However, unlike sugar, jobs in the leather industrystarted to inch up in the post-lockdown scenario. As the restrictions weregradually eased, a few industries started to hire more workers.
Job opportunities in the cement and textile industry rose beyond thepre-COVID levels by August 2020. The positive developments are consistentwith the growth in output of these industries (Table 2.6). The output ofthe cement and textile sector grew by 22.8 and 2.1 percent in Q1-FY21,compared to the visible contraction of 12.8 and 33.9 percent in Q4-FY20.
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Further analysis of wage rates points to similar trends within the skilledand unskilled labor force as described by the SBP report. The data showedthat unskilled labor wages grew by 7.4 and 6.6 percent in rural and urbanareas, respectively, during Q1-FY21.——————————
Similarly, in the skilled labor category, growth of 9.8 and 6.4 percent wasrecorded for the rural and urban regions, respectively. The noticeablyhigher growth rate of wages in the country-side areas can partly beattributed to higher rural inflation (10.8 percent) as compared to urbaninflation (7.5 percent) during Q1-FY21.
While the improvement in the available employment indicators owes to theresumption of economic activities after the lockdowns, the government andthe SBP have also played a significant role in restricting job loss throughtheir policies.
Accommodative fiscal and monetary measures were provided for the retentionof employment and recovery of the labor market. In particular, SBPintroduced the “Refinance Scheme for Wages to Prevent Layoffs,”specifically aimed at cushioning the COVID shock.
The report mentioned that the latest numbers show that the scheme preventedlayoffs of more than 1.6 million workers across Pakistan. By September2020, 83 percent of the total requested amount under the scheme wasapproved.
Moreover, other SBP initiatives like the Temporary Economic RefinanceFacility (TERF) and Debt Relief Scheme also played a role in speeding upthe recovery in various sectors, which eventually supported employment inthe economy.——————————
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On the fiscal side, the government gave incentives to the constructionsector, which is quite labor-intensive. This led to increased economicactivity in the construction sector and facilitated its employmentgeneration and retention.
Growth in construction-allied manufacturing sectors (such as cement andlong steel) and an increase in rural and urban construction wages supportthis. Also, the government, through its Ehsaas Program for social supportprovided financial assistance to the highly vulnerable daily-wage laborers,the majority of whom lost jobs during the period of economic inactivity.
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