Certain estimates suggest that there are currently 2.1 million Pakistani youths who are unemployed. The youth unemployment rate of the age group (15-24 years old) has reached 11.1 per cent, which is much higher than the worldwide average. The unemployment rate of university graduates is projected to be more than 30 per cent, according to 2025 predictions of the International Labour Organisation (ILO), a rate that far exceeds the average for developing nations. On average, one to 1.5 million new entrants are added to the labour force annually. This presents Pakistan with a long spell of unemployment at a time when the country is in the midst of a significant demographic bulge. Unless a conscious and permanent policy shift towards large-scale formal job creation in the private sector and the cultivation of market-relevant skills ensues, such a demographic opportunity will be squandered irreparably, and at a very high socioeconomic cost.
The scale of the challenge is significant. Sixty-four per cent of the population is under the age of thirty, and by 2030, some 100 million citizens would be of working age. However, the economy only creates formal jobs for less than half the number of new entrants into the labour-market per year. The female labour-force participation is at about 22 per cent which is very low if compared to other countries. The consequences are already being felt: Pakistan has already lost more than 700,000 highly skilled emigrants in 2024 alone. Persistently high rates of youth Not in Education, Employment or Training (NEET) reflect a growing disillusionment among university graduates, as the market value of tertiary degrees continues to decline.
Although external impediments (IMF programme conditionalities, high energy tariffs, and the residual impact of the 2022 floods) are relevant in the context of the discussion, they are not the primary constraints. The fundamental obstacles to economic growth are domestic policy distortions. These include an effective taxation on manufacturing that is 8–10 percentage points higher than on real estate and large-scale retail, creating an unfair disparity for the productive sectors. Furthermore, the Public Sector Development Programme devotes a mere three per cent to technical and vocational education and training (TVET), leading to a shortage of skilled workers. As a result, the export portfolio remains heavily concentrated in low-value-added textiles and has seen little change since the 1990s. This has resulted in net formal growth of private-sector employment remaining low, with the majority of the population confined to low-productivity and low-value addition informal employment.
It is evidenced by empirical data that rapid improvement is possible in similar middle-income economies. Over the period of one decade, Vietnam, Bangladesh, Morocco, and Jordan cut youth unemployment significantly using three intertwined policies: focused fiscal incentives to labour-intensive industries, large-scale public-private apprenticeship systems, and export diversification to higher-value-added sectors.
A five-point agenda that is believable and practical in nature is capable of creating a transformative result when followed through determination.
To begin with, enact a binding national pledge to generate 12 million new formal jobs in the private sector by 2035, with obligatory reporting of the annual progress to the National Assembly, and to the independent public disclosure.
Second, redesign the fiscal regime by lowering effective rates of tax on manufacturing and new industries investment, and extending the tax base to include hitherto under-taxed retailer chains, capital gains on real property and agricultural incomes above a given threshold.
Third, redirect at least 70 per cent of funds to private-sector-based dual-education apprenticeships (with private obligatory placement requirements) based on the time-tested German, Swiss, Moroccan and Jordanian systems, to annual amounts of about 300 billion rupees.
Fourth, launch a National Digital Jobs Mission that aims to prepare and place 3-5 million young people in freelancing, business-process outsourcing and work-from-home opportunities worldwide by 2032. Pakistan is already at the fourth position on the key digital platforms across the world; organised intervention of people can push Pakistan to the global top.
Fifth, create a new generation of Special Economic Zones that focuses on electronics assembly, renewable-energy parts, and IT-enabled services, which is supported by a lean regulation environment, credible infrastructure, and incentive packages that are time-limited.
The demographic window of Pakistan will be open up to around 2045. The policy tools that are needed to transform a young population into long term economic gain are quite established, economically feasible and politically achievable. The lack of progress on this front has been due to the lack of clear national prioritisation. The cost of not making changes is a significant loss of the most valuable economic resource of the country: its young population. Placing productive job creation as the national goal that should supersede many other national goals is no longer a policy option, but rather the prerequisite to creating a stable and a successful future of the rising generation.
Muhammad Saad is a Research Assistant at the Centre for Aerospace & Security Studies (CASS), Islamabad. He can be reached at [email protected]
