Why Pakistan Keeps Creating The Wrong Kind Of Jobs |
Pakistan has never been short on ‘announced’ ambitions. The present government has taken a clear and increasingly assertive stance to move the economy towards an export-oriented pathway, correct distortions created by decades of protection, and dismantle inefficiencies long associated with elite capture and sector-favoured policies. Aggressive tariff rationalisation, removal of anti-export bias, and an attempt to reallocate capital towards more competitive sectors signal a shift that is both necessary and overdue. But there is a deeper question that remains insufficiently examined, or one finds little evidence of: what if the constraint is not only where capital has been misallocated, but where people have been?
For years, the discourse has centred on protected sectors such as base textiles, automobiles, sugar, cement, and steel as the primary sources of inefficiency. This is not incorrect, and hence, the move towards export orientation is the need of the day. Yet focusing solely on this area risks missing more structural issues. There are segments of the economy that have remained relatively open and outward-facing, yet they, too, have struggled to scale into globally competitive export engines.
The explanation, therefore, must examine other factors that have hampered exports. A key area that must be confronted is the absence of a sustained strategy to develop human capital aligned with export transformation—a 1% increase in HDI, with high probability, can increase exports by 0.2 percentage points. Exports are not produced by incentives alone; they are produced by capabilities. However, the story of Pakistan’s labour force suggests that these capabilities are not being built at the scale or in the direction required. This becomes even more critical with advancements in digital and AI technologies.
For nearly two decades, Pakistan’s policymakers and development practitioners have spoken of its demographic dividend. A young population was expected to drive industrialisation, productivity, and export growth. But the underlying assumption—that youth will naturally move into productive sectors—has not held. And rightly so, as it had to be curated, not left on its own.
Over time, the share of employment in agriculture, historically the largest absorber of labour, has steadily declined (from over 45% to just 35.1%). Yet this decline has not been matched by a commensurate expansion in industry. Manufacturing employment (now at its lowest, at 14%) has remained largely stagnant, failing to absorb the labour exiting agriculture. Instead, the bulk of this labour has moved into services, particularly wholesale and retail trade, transport, and other low-productivity informal activities. This is not a structural transformation but a major........