Constantly slanting Labour productivity: upcoming danger

There are many important reasons for the fall in Pakistan's economy, whose roots are deep rooted in Pakistan's birth and its socio-political system. An important factor in these is the continuous decline in labour productivity of Pakistan.

In the year 2000, Pakistan’s labour productivity exceeded that of both China and India. A decade later, China had more than doubled its labour productivity and surpassed Pakistan in 2008, while India had caught up and eventually exceeded Pakistan in 2012.

Economists define labour productivity as the amount of economic output per worker in the economy. As a mathematical matter, it is calculated by dividing the gross domestic product (GDP), adjusted for purchasing power parity (PPP), by the total size of the labour force. Pakistan’s labour productivity is estimated at $15,430 in 2018, according to data from the International Labour Organisation (ILO), having grown at an average of 1.5% per year since the year 2000. India’s labour productivity is 20% higher, at $18,565, having grown at a much faster average of 5.7% per year during that same time period. China’s labour productivity is $29,499, having grown at 8.8% per year since 2000.

Causes

Pakistan’s workforce, in all its classifications, lack two big things: skills, and a strong work ethic, relative to labour in developed economies.

Pakistani employers, by and large, are too short-sighted to invest in the productivity of their labour force, which in turn means that the labour force is paid very little, which results in both shirking and a lack of sustained effort, which in turn results in a low level of trust between business owners and labour, and therefore the business owners continue to not invest in their labour force.

And then there is the problem of what might be called ‘disguised unemployment’. That describes a scenario where a person is employed, but does not have much to do, and hence is not really working. That can happen in circumstances where a person is employed by a business run  by members of their immediate or extended family. While the business does not need their labour, it is employing them as a form of family support.

The practise is common in the services sector of Pakistan, which forms about 53% of our GDP. The sector is large enough to absorb the labour employed on the basis of relationships rather than qualification or productivity. 

One might think that this is a relatively uncommon phenomenon, but it is so prevalent that the Pakistan Bureau of Statistics actually measures it, calling it “contributing family workers”, who form 21.4% of the total labour force, or 13.2 million people. Productivity is intimately linked with the skills of a labour and is particularly important in the manufacturing sector. 

Another core problem is the lack of a strong work ethic. From  the moment they are small children, Pakistani students enter an educational system that does not require of them a strong work ethic. It does not require consistent hard work, and tends to focus only on end-of-year or end-of-semester examinations, rather than requiring students to work diligently every day.

The problem starts at home, as parents have no vision about where they want their child to be. Furthermore, they have no mechanism to make the child a productive individual.

Its effect has started to appear on various sectors in economy of Pakistan. On the one hand, due to the growing imports from China, the industries of Pakistan are devastating, on the other, a large number of unemployment is taking the gargantuan form of not only economic point of view but as social and political problems also. This is a clear threat to Pakistan for the coming time.