Weak labour market contributing to increased poverty rate in Pakistan

A combination of sluggish economic growth, reduced labour demand across various sectors, and a decline in real wages for workers have collectively led to higher poverty rates within the country, said an official.

Kashif Nabi, Statistical Officer at Pakistan Bureau of Statistics (PBS), told WealthPK that low wages in the labour market and surging unemployment in the country are responsible for the expected poverty rate rise.

According to the World Bank Development Report, in the absence of public transfers that can mitigate the inflationary pressure on households, the poverty rate in Pakistan (measured in terms of the poverty line that is currently $3.65/day) is projected to increase to 37.2% next year. This will push an additional 1.7 million people into poverty compared to last year. He said that the underlying factors for low wages are reflected in the low growth in key sectors like services and industry.

“During the fiscal year 2022-23, the services and industrial sectors exhibited relatively unfavorable performance. The subdued growth rates observed in these sectors, in contrast to the expansion of the employable population, exerted a negative effect on wage levels,” he pointed out. Coupled with low wages, Kashif said, skyrocketing inflation led to a decrease in per capita consumption among low-income families. Higher prices further exacerbated the living standards of lower-middle-class and poor families. “Structural problems in the country are contributing to worsening the labour market conditions,” the official said. 

“Many jobs in Pakistan are in the informal sector that offers low wages and lack basic labour protections. Moreover, a significant portion of the population is employed in agriculture where earnings are often insufficient to lift households out of poverty,” he added.

He said that the labour market in Pakistan faces issues of both underemployment and unemployment. Many individuals are unable to find full-time employment, leading to low incomes and increased vulnerability to poverty.

The official said the government needs to introduce and strengthen social safety programs to reduce poverty. He urged the government to introduce comprehensive social protection programs, such as unemployment benefits and healthcare coverage.

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