Understanding unemployment
There is very little understanding of this very important economic indicator
By Zunairah Qureshi and Ghulam Abbas
U
nemployment. Berozgari. It is an economic indicator that has brought down governments and is constantly a bone of contention. At the very core of it the entire concept is very simple. People need livelihoods and in an economy where the services industry is the only path for anyone with no capital backing them - jobs are crucial. That said, there is very little understanding among people regarding what the ‘employment rate’ that is often at the center of economic debates is, how it is calculated, and what it stands for. Any A level economics textbook will tell you that the unemployment rate is the percentage of unemployed persons in the labour force which includes only those individuals who are eligible and available for employment. That makes sense. There is a certain
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section of the population that wants to be employed to qualify for employment and some of those people do not have jobs. But calculating the unemployment rate is a little more complicated than this.
A matter of definitions
T
o get a clearer picture, we need to understand how unemployed persons as well as the labour force are defined. Each country may have slightly-but-impactfully varying definitions for these terms. In our case how these terms are defined and consequently how the unemployment rate is calculated, is decided by the Pakistan Bureau of Statistics (PBS). A number of labour market indicators like the unemployment, underemployment, labour force participation rates, and others are derived from data collected through the Labor Force Survey (LFS). The survey is supposed to be conducted by PBS yearly.
However, the latest publicly available results are from the 2018 – 2019 LFS, which were published in September 2021. According to this survey, Pakistan’s unemployment rate for the fiscal year 2019 was 6.9%. This was a significant increase from the previous fiscal year when unemployment was recorded at 5.8%. However, bear in mind that LFS sets the working age at 10 years old, which is lower than the international standard of 15 years old. The unemployment rate for 2018 was reported at 5.8% in the 2017-2018 LFS results. However, in the Employment Trends Report 2018 published by PBS, the labour force was calculated with the minimum age limit set at 15 years instead of 10. This was likely done to make labour force related figures within this report comparable to international rates which meant that the unemployment rate for 2018 was reported as 5.7% in the Employment Trends Report. (Note that there may be other differences between how countries define and
