KARACHI: It may sound counter-intuitive, but research shows the likelihood of unemployment in Pakistan grows in proportion to the level of education.

A poorly developed labour market that’s unable to accommodate a rapidly growing number of educated workers has led to a high graduate unemployment rate.

A recent research paper written by Henna Ahsan and Muhammad Jehangir Khan of the Pakistan Institute of Development Economics (PIDE), which uses employment data from 2001-02 to 2020-21, shows that the gap between the rate of overall unemployment (6.3 per cent) and that of graduates (16.1pc) is almost 10-percentage-point wide.

There’re both supply- and demand-side reasons for such a substantial difference between the two rates of unemployment, according to the PIDE economists.

After staying relatively flat for decades, the number of universities grew manifold in a short span as the University Grant Commission was replaced with the Higher Education Commission in 2002. As a result, enrolment in universities grew at twice the rate of enrolment growth at other levels of education.

The “misalignment” between the demand and supply of graduates has contributed to the higher unemployment rate among recent graduates. A large number of individuals end up completing their tertiary education in subjects for which little demand exists, the paper noted.

Over 31pc of the educated youth is unemployed while women constitute 51pc of the total unemployed population in Pakistan. Data shows that enrolment in natural sciences in Pakistan is outpacing demand in the labour market.

“The gap between supply and demand is wider for graduates in natural sciences compared to social sciences and management sciences. Therefore, to address graduate unemployment, there is a need to look at the unemployment issue by fi­eld of study,” it noted.

The Labour Force Survey (LFS) does not provide data for segregated graduate disciplines and limits information to major categories like engineering, medicine, computer and agriculture. The analysis conducted by the PIDE economists shows the unemployment rate for graduates increased from 14.9pc in 2018-19 to 16.1pc in 2020-21.

Decomposing the unemployment rate into sub-disciplines produced an even gloomier picture: the unemployment rate for engineers doubled in just two years, from 11pc to 23.5pc.

Similarly, the unemployment rate for computer science graduates rose from 14.2pc to 22.6pc in the two-year period. The steep rise was from 11.4pc to 29.4pc for the graduates of agricultural sciences.

Graduates in medical sciences faced the lowest unemployment rate when compared to their peers in other disciplines. However, the unemployment rate within the medical discipline increased from 6.4pc to 10.8pc in just two years.

The unemployment rate among female graduates was about 3.8 times higher than that of their male counterparts. More than one-third of women graduates were unemployed in 2020-21.

The unemployment rate was close to 30pc for the graduates aged between 21 and 29, the highest among all age groups.

The average unemployment rate in urban areas (7.35pc) is higher than that in rural areas (5.85pc), according to the LFS 2020-21. Conversely, the graduate unemployment rate in the rural areas (22pc) is nearly twice that in the urban areas (12pc), the research paper showed.

The graduate unemployment rate is high in Khyber Pakhtunkhwa and Punjab, which shows an excess supply of graduates amid the inability of these labour markets to absorb new graduates.

Engineering graduates face higher unemployment in Khyber-Pakhtunkhwa. Agriculture graduates face a high unemployment rate in Sindh and Punjab even though these provinces are rich in agriculture.

Low-skilled graduates, poor quality of education contributes to the unemployment rate in Pakistan, the research paper said.

“For better analysis and policy, we need to add more disciplines/fi­elds of study, especially social and natural sciences, in the LFS. This will help policymakers accurately analyse the supply and demand gap of these graduates in the labour market,” it added.

Published in Dawn, April 9th, 2023