Unemployment in Pakistan 2025
Causes, Impact, and Strategic Solutions for Economic Growth
High joblessness in Pakistan creates severe economic problems and blocks national growth. The job market of Pakistan will add 5.6 million unemployed workers to its ranks in 2025 for a total unemployment rate of 7.5 percent. This circumstance raises key questions: What basic issues make this job scarcity continue growing? The outcome of these changes will affect our financial stability and social progress throughout our growth period. This paper analyses Pakistan's unemployment problems and offers practical steps to build a healthy and stable employment system. Clean action is required. To create a workforce that can prosper in the face of continuous market changes, all firms must collaborate immediately.
Unemployment in Pakistan: Current Overview
Pakistani laboratories are grappling with significant unemployment rates, which reached 7.5 percent in January 2025. In recent years, the work force size has been declining. Unemployment is expected (ILO and Dawn) to reach 5.6 million by 2025, up 1.5 million from 2021.
Key Statistics
Total Labour Force: Approximately 71.76 million individuals.
Employed Population: Roughly 67.25 million.
Unemployed Population: About 4.51 million, resulting in an unemployment rate of 6.3% according to the Economic Survey 2023-24.
Youth Unemployment Rate: The youth (ages 15-24) face an unemployment rate of 11.1%, significantly higher than the national average.This issue is further discussed by Brecorder
Contributing Factors
Economic Distress: The COVID-19 pandemic plus floods from 2022 and ongoing financial difficulties have created significant disruptions in the workforce.PIDE emphasises the role of economic shocks in worsening unemployment.
Gender Disparities: Female unemployment hits 4.4 percentage points above male unemployment at 14.4% compared to 10%. Pakistantoday highlights these disparities further.
Educational Mismatch: The absence of educational and technical skills in the economy results in an unemployment rate of up to 16% for college graduates. Statista provides statistics on the extent of this disparity in Pakistan.
Informal Sector Growth: In the absence of better opportunities, many youth enter informal work despite low pay and unstable job situations.
Main Causes of High Unemployment in Pakistan
Unemployment in Pakistan is influenced by a variety of interconnected factors:
Growing Population: Pakistan's fast population expansion has boosted the number of job seekers in the labour market. As the population grows, too many job seekers are having difficulty finding work. Business economics demonstrates how demographic pressures are increasing the unemployment issue.
Lack of Quality Education: Pakistan's educational system trains pupils to memorize without giving them practical skills. People with degrees begin working without the requisite abilities, therefore their talents differ from what employers want.
Illiteracy: Most people in the country cannot read or write, which keeps them from finding suitable jobs. Jobs need basic reading and writing abilities, but without education, individuals are stuck in a cycle of poverty and unemployment.
Growing Population: Pakistan's fast population growth produces many more job seekers than actually exist in the workforce. Too many job seekers struggle to find work because the population continues to grow rapidly.
Lack of Quality Education: Pakistan's education system teaches students to memorise without teaching them useful skills. People with degrees start working without necessary abilities, which makes their skills different from what businesses require.This issue is covered in depth by JSTOR.
Skill Mismatch: Most people in the country cannot read or write, which keeps them from finding suitable jobs. Jobs need basic reading and writing skills, but without education, people remain trapped in a cycle of poverty and unemployment.
Inadequate Job Opportunities: The labour market in Pakistan shows few stable jobs that pay well. Most young people choose unpredictable jobs that pay very little money.
Informal Sector Growth: The informal industry employs a large number of people but operates outside of legal structures and provides few worker safeguards. This market sector does not create enough job openings to fulfil the needs of potential employees, which creates unemployment.
Historical Trends in Unemployment
The employment situation in Pakistan has often transformed due to past political regimes.Pakistan's employment numbers have fluctuated dramatically throughout the years due to both local political leadership and global factors.
The nation expects unemployment to reach 7.5% by 2025 through financial stabilisation programs and foreign worker earnings.
Zia-ul-Haq's era (1984-1988): Military rule, supported by the Cold War and huge remittances from the Middle East, reduced unemployment to 3.0%.
Benazir Bhutto's era (1988-1990): When Benazir Bhutto ruled from 1988 to 1990, the unemployment rate reached 3.6%, mainly due to her government's political instability and privatization efforts. Instacare provides an understanding of the socio-political impact on unemployment during this period.
Nawaz Sharif's first era (1990-1999): Economic changes during Nawaz Sharif's first government from 1990 to 1999 promoted international migration while the unemployment rate rose from 3% to 4%.
Pervez Musharraf's military regime (1999-2008): From 1999 to 2004, the employment rate increased from 6.5% to 8.3% as the IT sector grew and foreign trade created economic problems.
Asif Ali Zardari's tenure (2008-2013): The employment situation in Pakistan did not improve during Asif Ali Zardari's presidency from 2008 to 2013 as market conditions deteriorated worldwide and the nation struggled to meet its energy needs.
Nawaz Sharif's second term (2013-2018): Improvements in CPEC infrastructure brought the unemployment level in the economy to 7.2%.
Imran Khan's regime (2018-2022): The country's unemployment rate rose to 6.8% as the country struggled with its IMF program and faced the COVID-19 health crisis in 2020.
Shahbaz Sharif Administration (2022-Present): A combination of shaky finances, rising inflation, and political problems has led to 7.5% unemployment.
The nation expects unemployment to reach 7.5% by 2025 through fiscal stabilization programs and the income of foreign workers.
Impact of Job Skills Mismatch on Unemployment Rates in Pakistan
Most unemployment in Pakistan happens because people lack the skills employers need to hire them. This problem emerges in numerous ways, impacting both people and the overall economy:
Educational Mismatch: Graduates frequently possess degrees that employers cannot use effectively. A survey indicates that graduates deal with qualification mismatches in 35 percent of cases, while 27 percent have skill problems that make them unfit or overqualified for many positions. Competent people encounter problems acquiring suitable occupations because of this mismatch, resulting in rising unemployment rates.
Underutilisation of Skills: Employees cannot use their education level properly because they work in positions that need less education than their qualifications. Placing people in roles below their education level harms how well workers do their job and reduces national economic growth. Low company efficiency occurs when employees do not have the right job positions for their skills.
Increased Competition: Candidates face significant challenges when their qualifications do not match the job requirements. Job candidates matching job requirements compete with both layoffs and job seekers, thus creating a job market shortage affecting job selection. Job competition has grown so high that it pushes recent graduates out of employment opportunities.
Long-term Unemployment: Unemployment lasts longer for applicants who are unable to find a job that matches their talents and education. Being unemployed for an extended time decreases both skill level and job opportunities for future employment. They cannot move to new jobs since they don't have the required job experience.
Wage Penalties: When employees have more training or experience than needed for their job position, they typically earn less pay than qualified employees who are properly matched to their positions. Financial constraints force many educated young people into jobs below their skill level, which raises their unemployment rates.
Informal Sector Growth: People with abilities move to informal jobs because they cannot get regular formal positions that offer security and decent salaries. When employers use this system they avoid dealing with the unemployment issue and force working families to stay in low-pay unskilled jobs.
Impacts of Unemployment
Economic Consequences: When there are unemployed workers in the economy it leads to production losses that force both increased foreign goods purchases and foreign aid requests. The Investopedia site shows how increased unemployment hurts the full economy.
Social consequences: Unemployment leads people without work to poverty and increases societal tensions plus crime rates in the nation. People who lose their jobs develop mental health issues that display as stress and health problems.
Brain Drain: Too many well-educated Pakistanis leave because overseas jobs are better than what their country offers. As a result, Pakistan has less skilled workers to build its economy..
Strain on Public Resources: When unemployment rises more people demand welfare support which overburdens my nation's limited resources.
Government Policies and Efforts
Through official initiatives and policies, the government operates.The government responded to these problems by launching a number of programs aimed at fostering skill development and job creation:
National Vocational and Technical Training Commission (NAVTTC): By better matching education to market demands, NAVTTC seeks to improve technical training.
Prime Minister’s Youth Skill Development Programme: The Prime Minister's Youth Skill Development Programme aims to prepare young people in different skills for jobs at home and overseas.
Ehsaas Program and Kamyab Jawan Program: The programs strive to battle joblessness by supporting workers with funds and advancing business development. These programs often fail because they do not receive enough support and operate poorly.
Proposed Solutions
Industrial Growth: Business zones that export products can help create a lot of new jobs.
Educational Reforms: To match workforce needs with job market requirements, we must teach students practical skills and prepare them for specific careers.
Encouraging Entrepreneurship: We can increase employment and lessen our reliance on conventional labor options by assisting startups and small enterprises in expanding.
Improving Economic Stability: The optimal conditions for job development include stable political leadership, robust economic growth, and public infrastructure investment.
Conclusion
The employment crisis in Pakistan needs organised efforts from different groups because various issues affect job availability. To create lasting fixes for Pakistan's labour market, we must tackle its fundamental issues, including excessive population growth, mismatched educational programs, economic instability, and worker skill deficiencies. Pakistan can create jobs and build a strong sustainable economy by matching workplace needs with proper policies. PIDE Research provides recommendations on tackling these systemic challenges.