Labour Market Dynamics In Pakistan: Evidence From The Longitudinal Data

The bulk of research on labour market conditions in Pakistan has concentrated on the economic activity rate, the number of employed persons or the unemployment rate at a particular point in time (Nasir, 2001). These stock measures of labour market situation are useful from a policy viewpoint as they give a broad indication of the dimension of the problem. For instance, the recent labour force surveys show an increase in the level of open unemployment from 5.9 percent in 1997-98 to 7.8 percent in 1999-2000. There is also an emerging consensus that during the 1990s poverty has increased at the national as well as for rural and urban areas of the country (Qureshi and Arif, 2001). Labour market is considered as the main route for establishing the link between macro policies, the resulting GDP growth and poverty alleviation. Accordingly, Interim Poverty Reduction Strategy Paper (IPRSP) and other development plans have suggested various targets of employment creation for poverty reduction. However, the stock measures of labour market conditions, such as unemployment rate, are considered to be inadequate from the viewpoint of developing appropriate policy responses. There is a need to gain further insights by examining the structure of labour market in terms of its dynamic components: these being the turnover of persons into and out of the labour force and turnover into and out of employment and unemployment pools. Some, but not all, movements from being unemployed to being outside labour force may reflect an inability to find desirable work (Clark and Summer, 1979; Gonul, 2001).