ECONOMICS

Economics is the social science that studies the production, distribution, and consumption
of goods and services. A definition that captures much of modern economics is that of
Lionel Robbins in a 1932 essay:
“The science which studies human behavior as a relationship between ends and scarce
means which have alternative uses.”
Scarcity means that available resources are insufficient to satisfy all wants and needs.
Absent scarcity and alternative uses of available resources, there is no economic problem.
The subject thus defined involves the study of choices as they are affected by incentives
and resources.

Areas of economics:
Areas of economics may be divided or classified into various types, including:

• microeconomics and macroeconomics

• positive economics ("what is") and normative economics ("what ought to be")
• mainstream economics and heterodox economics
• fields and broader categories within economics.

One of the uses of economics is to explain how economies, as economic systems, work
and what the relations are between economic players (agents) in the larger society.
Methods of economic analysis have been increasingly applied to fields that involve
people (officials included) making choices in a social context, such as crime, education,
the family, health, law, politics, religion, social institutions, and war.

In the following brief discussion we will define only Micro and macro Economics as they
are further in relation to our term paper.

Microeconomics

Microeconomics examines the economic behavior of agents (including individuals and

firms) and their interactions through individual markets, given scarcity and government
regulation. A given market might be for a product, say fresh corn, or the services of a
factor of production, say bricklaying. The theory considers aggregates of quantity
demanded by buyers and quantity supplied by sellers at each possible price per unit. It
weaves these together to describe how the market may reach equilibrium as to price and
quantity or respond to market changes over time. This is broadly termed demand-and-
supply analysis. Market structures, such as perfect competition and monopoly, are
examined as to implications for behavior and economic efficiency. Analysis often
precedes from the simplifying assumption that behavior in other markets remains
unchanged, that is, partial-equilibrium analysis. General-equilibrium theory allows for

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changes in different markets and aggregates across all markets, including their
movements and interactions toward equilibrium.

Macroeconomics

Macroeconomics examines the economy as a whole "top down" to explain broad

aggregates and their interactions. Such aggregates include national income and output,
the unemployment rate, and price inflation and sub aggregates like total consumption and
investment spending and their components. It also studies effects of monetary policy and
fiscal policy. Since at least the 1960s, macroeconomics has been characterized by further
integration as to micro-based modeling of sectors, including rationality of players,
efficient use of market information, and imperfect competition. This has addressed a
long-standing concern about inconsistent developments of the same subject.
Macroeconomic analysis also considers factors affecting the long-term level and growth
of national income. Such factors include capital accumulation, technological change and
labor force growth.

DEVELOPMENT ECONOMICS
Development Economics is the branch of economics that studies developing countries.
While there is no generally accepted definition of "developing countries," the expression
refers to relatively poor countries—or countries where standards of living are relatively
low on average. Most of these countries are located in three geographical areas: Sub-
Saharan Africa, Central and South Asia, and Latin America. Relatively poor countries,
however, are also found in East Asia (e.g., China and Vietnam), the Middle East and
North Africa (e.g., Iraq and Algeria), and Eastern Europe (e.g., Bulgaria and Romania).
Conversely, Latin America includes a number of relatively rich countries (e.g., Argentina
and Chile).

UNEMPLOYMENT
Unemployment is the state in which a person is without work, available to work, and is
currently seeking work. The unemployment rate is used in economic studies and
economic indexes such as the United States' Conference Board's Index of Leading
Indicators. The rate is determined by dividing the number of unemployed workers by the
total civilian labor force.

TYPES OF UNEMPLOYMENT

Economists distinguish between five major kinds of unemployment, i.e., cyclical,

frictional, structural, classical, and Marxian. (Another distinction, not discussed here, is
between voluntary and involuntary unemployment.) Real-world unemployment may
combine different types, while all five might exist at one time. The magnitude of each of
these is difficult to measure, partly because they overlap and are thus hard to separate

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from each other. All but cyclical unemployment can be seen as existing at full
employment, the level of employment and unemployment that represents the inflation
barrier to demand-side growth.

Cyclical unemployment
This type of unemployment exists due to inadequate effective aggregate demand. It gets
its name because it varies with the business cycle, though it can also be persistent, as
during the Great Depression of the 1930s. Gross domestic product is not as high as
potential output because of demand failure, due to (say) pessimistic business expectations
which discourages private fixed investment spending. Low government spending or high
taxes, under consumption, or low exports net of imports may also have this result.

Some consider this type of unemployment one type of frictional unemployment in which
factors causing the friction are partially caused by some cyclical variables. For example,
a surprise decrease in the money supply may shock participants in society. Then, we may
see recession and cyclical unemployment until expectations adjust to the new conditions.

In this case, the number of unemployed workers exceeds the number of job vacancies, so
that if even all open jobs were filled, some workers would remain unemployed. This kind
of unemployment coincides with unused industrial capacity (unemployed capital goods).

Frictional unemployment
This unemployment involves people being temporarily between jobs, searching for new
ones; it is compatible with full employment. It is sometimes called search unemployment
and can be voluntary. New entrants (such as graduating students) and re-entrants (such as
former homemakers) can also suffer a spell of frictional unemployment.

Frictional unemployment exists because both jobs and workers are heterogeneous, and a
mismatch can result between the characteristics of supply and demand. Such a mismatch
can be related to skills, payment, work time, location, attitude, taste, and a multitude of
other factors. Workers as well as employers accept a certain level of imperfection, risk or
compromise, but usually not right away; they will invest some time and effort to find a
better match. This is in fact beneficial to the economy since it results in a better allocation
of resources. However, if the search takes too long and mismatches are too frequent, the
economy suffers, since some work will not get done. Therefore, governments will seek
ways to reduce unnecessary frictional unemployment.

Examples
One kind of frictional unemployment is called wait unemployment: it refers to the effects
of the existence of some sectors where employed workers are paid more than the market-
clearing equilibrium wage. Not only does this restrict the amount of employment in the
high-wage sector, but it attracts workers from other sectors who wait to try to get jobs
there. The main problem with this theory is that such workers will likely "wait" while
having jobs, so that they are not counted as unemployed. In Hollywood, for example,
those who are waiting for acting jobs also wait on tables in restaurants for pay (while

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acting in "Equity Waiver" plays at night for no pay). However, these workers might be
seen as underemployed.

Another type of frictional unemployment is seasonal unemployment, where specific

industries or occupations are characterized by seasonal work which may lead to
unemployment. Examples include workers employed during farm harvest times or those
working winter jobs on the ski slopes or summer jobs such as life-guarding at outdoor
pools and agricultural labor.

Structural unemployment
The better the economy is doing, the lower this type of unemployment is likely to be.
This is because people will usually be able to find jobs that suit them more quickly when
the economy is doing well This involves a mismatch between the good workers looking
for jobs and the vacancies available. Even though the number of vacancies may be equal
to the number of the unemployed, the unemployed workers lack the skills needed for the
jobs — or are in the wrong part of the country or world to take the jobs offered. It is a
mismatch of skills and opportunities due to the structure of the economy changing. That
is, it is very expensive to unite the workers with jobs. One possible example in the rich
countries is the present combination of the shortage of nurses with an excess labor supply
in Information Technology. Unemployed programmers cannot easily become nurses,
because of the need for new specialized training, the willingness to switch into the
available jobs, and the legal requirements of such professions.

Structural unemployment is a result of the dynamic changes of a capitalist economy (such

as technological change and capital flight) — and the fact that labor markets can never be
as fluid as (say) financial markets. Workers are "left behind" due to costs of training and
moving (e.g., the cost of selling one's house in a depressed local economy), plus
inefficiencies in the labor markets, such as discrimination.

Structural unemployment is hard to separate empirically from frictional unemployment,

except to say that it lasts longer. It is also more painful. As with frictional unemployment,
simple demand-side stimulus will not work to easily abolish this type of unemployment.

Some sort of direct attack on the problems of the labor market — such as training
programs, mobility subsidies, anti-discrimination policies, a Basic Income Guarantee,
and/or a Citizen's Dividend — seems required. The latter provide a "cushion" of income
which allows a job-seeker to avoid simply taking the first job offered and to find a
vacancy which fits the worker's skills and interests. These policies may be reinforced by
the maintenance of high aggregate demand, so that the two types of policy are
complementary.

Structural unemployment may also be encouraged to rise by persistent cyclical

unemployment: if an economy suffers from long-lasting low aggregate demand, it means
that many of the unemployed become disheartened, while their skills (including job-
searching skills) become "rusty" and obsolete. Problems with debt may lead to

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homelessness and a fall into the vicious circle of poverty. This means that they may not
fit the job vacancies that are created when the economy recovers.

Much technological unemployment (e.g. due to the replacement of workers by robots)

might be counted as structural unemployment. Alternatively, technological
unemployment might refer to the way in which steady increases in labor productivity
mean that fewer workers are needed to produce the same level of output every year. The
fact that aggregate demand can be raised to deal with this problem suggests that this
problem is instead one of cyclical unemployment. As indicated by Okun's Law, the
demand side must grow sufficiently quickly to absorb not only the growing labor force
but also the workers made redundant by increased labor productivity. Otherwise, we see a
jobless recovery such as those seen in the United States in both the early 1990s and the
early 2000s.

Seasonal unemployment might be seen as a kind of structural unemployment, since it is a

type of unemployment that is linked to certain kinds of jobs (construction work,
migratory farm work). The most-cited official unemployment measures erase this kind of
unemployment from the statistics using "seasonal adjustment" techniques.

Hidden unemployment
Hidden, or covered, unemployment is the unemployment of potential workers that is not
reflected in official unemployment statistics, due to the way the statistics are collected. In
many countries only those who have no work but are actively looking for work (and/or
qualifying for social security benefits) are counted as unemployed. Those who have given
up looking for work (and sometimes those who are on Government "retraining"
programmes) are not officially counted among the unemployed, even though they are not
employed. The same applies to those who have taken early retirement to avoid being laid
off, but would prefer to be working. The statistic also does not count the
"underemployed" - those with part time or seasonal jobs who would rather have full time
jobs. Because of hidden unemployment, official statistics often underestimate
unemployment rates.

Classical unemployment
In this case, like that of cyclical unemployment, the number of job-seekers exceeds the
number of vacancies. However, the problem here is not aggregate demand failure. In this
situation, real wages are higher than the market-equilibrium wage. In simple terms,
institutions such as "the minimum wage" deter employers from hiring all of the available
workers, because the cost would exceed the technologically-determined benefit of hiring
them (the marginal product of labor). Some economists theorize that this type of
unemployment can be reduced by increasing the flexibility of wages (e.g., abolishing
minimum wages or employee protection), to make the labor market more like a financial
market.

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Marxian unemployment

As Karl Marx claimed (and Michal Kalecki emphasized), some unemployment — the
reserve army of the unemployed — is normally needed in order to maintain work
discipline in jobs, keep wages down, and protect business profitability. If profitability
suffers a sustained depression, capitalists can and will punish people by imposing a
recession via their control over investment decisions (a capital strike). (Incidentally, in
this section the term "capitalist" is used to refer to a person who owns and controls
economic capital, whether or not she or he holds "capitalist" political or ethical views.)
To the Marxian school, these strikes are rare, since in normal times the government,
responding to pressure from their most important constituencies, will encourage
recessions before profits are hurt.

To Marxists, this kind of unemployment cannot be abolished without overthrowing

capitalism as an economic system and replacing it with democratic socialism.

Full employment
In theory, it is possible to abolish cyclical unemployment by increasing the aggregate
demand for products and workers. However, eventually the economy hits an "inflation
barrier" imposed by the four other (supply-side) kinds of unemployment to the extent that
they exist.

Some economists see the inflation barrier as corresponding to the natural rate of
unemployment. The "natural" rate of unemployment is defined as the rate of
unemployment that exists when the labour market is in equilibrium and there is pressure
for neither rising inflation rates nor falling inflation rates. More scientifically, this rate is
sometimes referred to as the NAIRU or the Non-Accelerating Inflation Rate of
Unemployment

No matter what its name, this means that if the unemployment rate gets "too low,"
inflation will get worse and worse (accelerate) in the absence of wage and price controls
(incomes policies). Others simply see the possibility of inflation rising as the
unemployment rate falls. This is the famous Phillips curve.

One of the major problems with the NAIRU theory is that no-one knows exactly what the
NAIRU is (while it clearly changes over time). The margin of error can be quite high
relative to the actual unemployment rate, making it hard to use the NAIRU in policy-
making.

Another, normative, definition of full employment might be called the ideal

unemployment rate. It would exclude all types of unemployment that represent forms of
inefficiency. This type of "full employment" unemployment would correspond to only
frictional unemployment (excluding that part encouraging the McJobs management
strategy) and would thus be very low. However, it would be impossible to attain this full-
employment target using only demand-side Keynesian stimulus without getting below the

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NAIRU and suffering from accelerating inflation (absent incomes policies). Training
programs aimed at fighting structural unemployment would help here.

To the extent that hidden unemployment exists, it implies that official unemployment
statistics provide a poor guide to what unemployment rate coincides with "full
employment".

PAKISTAN AS A DEVELOPING COUNTRY:

ECONOMY OF PAKISTAN
Pakistan, rapidly developing nation, has a diverse economy that include textiles,
chemicals, food processing, agriculture and other industries.

The economy has suffered in the past from decades of internal political disputes, a fast
growing population, mixed levels of foreign investment, and a costly, ongoing
confrontation with neighboring India. However, IMF-approved government policies,
bolstered by foreign investment and renewed access to global markets, have generated
solid macroeconomic recovery the last decade. Substantial macroeconomic reforms since
2000, most notably at privatizing the banking sector have helped the economy. Pakistan
has seen a growing middle class population since then and poverty levels have decreased
by 10% since 2001.

Islamabad has steadily raised development spending in recent years, including a 52% real
increase in the budget allocation for development in FY07, a necessary step toward
reversing the broad underdevelopment of its social sector. The fiscal deficit - the result of
chronically low tax collection and increased spending, including reconstruction costs
from the devastating Kashmir earthquake in 2005 was manageable. Development in
urban areas of Pakistan has remained high but is low in rural areas.

Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005
before easing to 7.9% in 2006. The central bank is pursuing tighter monetary policy while
trying to preserve growth. Foreign exchange reserves are bolstered by steady worker
remittances, but a growing current account deficit - driven by a widening trade gap as
import growth outstrips export expansion - could draw down reserves and dampen GDP
growth in the medium term.

Employment
The high population growth in the past few decades has ensured that a very large number
of young people are now entering the labor market. Even though it is among the seven
most populous Asian nations, Pakistan has a lower population density than Bangladesh,
Japan, India, and the Philippines. In the past, excessive red tape made firing from jobs,
and consequently hiring, difficult. Significant progress in taxation and business reforms
has ensured that many firms now are not compelled to operate in the underground
economy.

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 Economy Of Pakistan
Currency 100 Pakistani Rupee
(PKR)
= 1.64908 US dollar
= 1.23810 Euro In late 2006, the
Fiscal year July 1—June 30 government
launched an
Current fiscal year (2007—2008) ambitious
Central bank The State Bank of nationwide service
Pakistan (SBP) employment scheme
aimed at disbursing
Trade organizations ECO, SAFTA, ASEAN, almost $2 billion
and treaties WIPO and WTO over five years.
Fiscal Budget $24.5 billion (revenue)
$31.07 billion
(expenditure)
Inflation 7.9% (2006 est.)

People
President Pervez Musharraf
Prime Minister Mohammad Mian
Soomro
Commerce Shahzada Alam Monnoo
Minister
SBP Governor Dr. Shamshad Akhtar
SECP Razi ur Rehman Khan

Gross Domestic Product (GDP)

GDP at PPP $504.3 billion
(2008)
GDP at current exchange
rates
GDP real growth rate (at 6.9%(2008 est.)
PPP)

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 GDP growth rate 6.6% (2008 est.)
GDP per capita $3320.12 (2008)
GDP by sector agriculture: 19.6%
industry: 26.8%
services: 53.7%

Demographics
Population 165,803,560 (2006
est.)
Population below 23% (2007)
poverty line
Labor force 49.18 million
Unemployment rate 7.5% (2007 est.)

Production
Agricultural cotton, wheat, rice, sugarcane
products fruits, vegetables, milk, beef,
mutton, eggs, shrimp, poultry,
tea
Main Textiles, chemicals, food
industries processing, steel, transport
equipment, automotives,
machinery, beverages,
construction, materials,
clothing, paper products.

CAUSES OF UNEMPLOYMENT

The several causes on unemployment have been defined under:

• The main reason for the high level of unemployment is technological progress.
Don't get me wrong; progress is good and it makes life easier. But if every year
we produce the same amount of goods with fewer people -- in a few years far less
working hours are needed to produce all the goods that are required. The

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 historical trend has been to use less and less working hours per week. If we do
not continue this trend, the supply of working hours is greater than the demand.
An oversupply of working hours means they are worth less, wages and salaries
get reduced. Also many persons are out of work; their working hours are no
longer needed. Those that are out of work have no income and therefore the
demand for goods goes down. With fewer sales, less gets produced, more
persons are laid off. This is a vicious circle that accelerates unemployment and
produces crime; because some will turn to crime to obtain income.
• It makes its appearance in a great variety of circumstances, some in personal
factors, some in economic changes, and some in legislative and regulatory
conditions.
• Poorer capitalist countries lack a modern welfare state and unemployment
insurance so that it is very difficult to afford being unemployed for very long:
they often end up taking jobs below their skill levels. Those who might be
counted as "unemployed" in the rich countries end up instead being
underemployed and not counted.
• Others argue that unemployment actually increases the more the government
intervenes into the economy. For example, minimum wages raise costs of doing
business and businesses respond by laying off workers. Laws restricting layoffs
make businesses less likely to hire in the first place leaving many young people
unemployed and unable to find work.

• Economic growth

The labor market is a derived demand market – that is the demand for
labor will be determined by the level of goods and services sold in an
economy. A decline in AD will cause an increase in unemployment.

• The stance of macro-economic policies

o Expansionary would cause an increase in economic activity, causing

unemployment to drop.
o Tightening policies will cause a slowdown in growth and increase in
unemployment.
• Constraints on economic growth
o High economic growth will cause a decrease in unemployment, but will
also put a lot of pressure on inflation, which is a bigger concern for
governments.
o Rising participation rate
o Structural change
o Technological change
o Productivity

• Another cause of unemployment (demand-side) is simply a lack of aggregate

demand. When there isn't enough demand employers will not need as many

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 workers, and so demand-deficient unemployment results. Keynesian economists in
particular focus on this cause.
• Unemployment caused by supply-side factors results from imperfections in the
labour market. A perfect labour market will always clear and all those looking for
work will be working - supply will equal demand. However, if the market doesn't
clear properly there may be unemployment. This may happen because wages
don't fall properly to clear the market. This is shown in the diagram below:

Wages are initially too high and so unemployment of ab results (supply is greater than
demand). To get rid of this unemployment and clear the market wages should fall.
However, if they are 'sticky-downwards' this may not happen and the unemployment may
persist.

• Supply-side unemployment may also happen because there is occupational or

geographical immobility. It may happen because there is poor information about
job opportunities. This will lead to people taking a long time looking for jobs,
increasing the level of frictional or search unemployment.

SOLUTIONS TO THE PROBLEM OF UNEMPLOYMENT

It used to be considered that about 3% of the labor force would be unemployed at any one
time normally, even when there was no cyclical unemployment. That 3% was
continuously changing in composition--it was not that the same 3% was continuously
unemployed.

Some seasonal unemployment is remediable, but some is not. At one time the automobile
industry changed models seasonally and in the process laid off many employees for a
time. They have reduced the amount of such seasonal unemployment. Seasonal
unemployment is neither prolonged nor large in amount. How much it can be reduced
further is uncertain. In agribusiness, unemployment insurance can help tide the
unemployed over.

There is no economic policy to deal with the hard-core unemployed. Perhaps social
workers can help some of them develop better work habits or do other things to make
themselves more employable.

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Structural unemployment might be reduced by any measures that could improve labor
mobility, either geographically or by more or subsidized retraining programs.
Cyclical unemployment is a serious problem and one that needs to be dealt with by
government economic policies. To begin with, prolonged unemployment is of course a
big economic problem for most workers and their families. In addition, the longer such
unemployment lasts the more the toll on a workers skills, work habits, and morale. The
first recourse is unemployment insurance, introduced in the Great Depression, but
designed to tide over short term seasonal unemployment, and not even now extended to
cover all the long term unemployment of some recessions or depressions.

The main helpful government policy besides that is what is called macro-economic
stabilization policy. It involves an easy money low interest rate policy on the part of the
Federal Reserve monetary authorities and deficit spending by the federal government
until the economy recovers. For a long time the latter policy upset many people,
especially Republicans, who contended erroneously that a federal government deficit was
as bad or worse than a household not knowing enough to balance its budget normally.
But a federal deficit can offset the reduction in business investment that causes declines
in the downswing of the business cycle and thus can maintain employment at higher
levels than would otherwise prevail. That no longer seems to worry many people, even
Republican who now creates big budget deficits with impunity for their own purposes.
A last resort would be to have government become employer of last resort-if
unemployment became too serious a problem, government could employ those without
jobs and put them to work doing socially useful work.

More than incidentally, it could pay a so-called living wage, and that would induce
industry to do the same when it was ready to employ the labor again. In the Great
Depression of the 1930s without any such declared policy, the Federal government hired
artists who had no chance of employment for quite some time, and put them to work
painting picture for many public buildings. It even kept some musicians skills intact by
paying them to put on symphony concerts. It was derided at the time as a terrible waste of
money, but it alone kept many artists & musicians in shape for the jobs they got when the
economy revived.
One structural solution to unemployment proposes a graduated retail tax, or "jobslevy”,
to firm where labor is more expensive than capital. This method will shift tax burden to
capital intensive firms and away from labor intensive firms. In theory this will make
firms shift operations to a "golden mean" between labor intensive and capital intensive
production. The excess tax revenue from the jobs levy would finance labor intensive
public projects.

The most developed countries have aids for the unemployed as part of the welfare state.
These unemployment benefits include unemployment insurance, welfare, unemployment
compensation and subsidies to aid in retraining. The main goal of these programs is to
alleviate short-term hardships and, more importantly, to allow workers more time to
search for a good job.

MEASURING UNEMPLOYMENT

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Though many people care about the number of unemployed, economists typically focus
on the unemployment rate. This corrects for the normal increase in the number of people
employed due to increases in population and increases in the labor force relative to the
population. The unemployment rate is expressed as a percent, and calculated as follows:

UNEMPLOYMENT RATE = UNEMPLOYED WORKERS *100

____________________
TOTAL LABOUR FORCE
As defined by the International Labour Organization, "unemployed workers" are those
who are currently not working but are willing and able to work for pay, currently

available to work, and have actively searched for work.

The ILO describes 4 different methods to calculate the unemployment rate:

• Labour Force Sample Surveys are the most preferred method of unemployment
rate calculation since they give the most comprehensive results and enables
calculation of unemployment by different group categories such as race and
gender. This method is the most internationally comparable.
• Official Estimates are determined by a combination of information from one or
more of the other three methods. The use of this method has been declining in
favor of Labour Surveys.
• Social Insurance Statistics such as unemployment benefits, are computed base on
the number of persons insured representing the total labour force and the number
of persons who are insured that are collecting benefits. This method has been
heavily criticized due to the expiration of benefits before the person finds work.
• Employment Office Statistics are the least effective being that they only include a
monthly tally of unemployed persons who enter employment offices. This method
also includes unemployed who are not unemployed per the ILO definition.

UNEMPLOYMENT SCARRING
IS UNEMPLOYMENT REALLY SCARRING?
AFFECTS OF UNEMPLOYMENT

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Joblessness leaves permanent scars on individuals. They not only lose income during
periods of joblessness they are also further scarred by these experiences when they find
employment. A spell of unemployment is found to carry a wage penalty of about 6% on
re-entry in Britain, and after three years, they are earning 14% less compared to what
they would have received in the absence of unemployment. The scars are also carried into
their second employment spell. The first spell of joblessness is found to cause the most
damage. Redundancy seems to be less stigmatizing.

How unemployment is individual and social problem

Unemployment is caused by many factors in a modern market economy. It can be caused
by rapid technological change, business cycle or recessions, seasonal factors in some
industries particularly such as changes in tastes and climatic conditions which affects
demand for certain products and services, individual perceptions and willingness to work
and search for jobs, their values and attitudes towards some jobs and about employers,
accessibility for retraining and acquisition of work skills, willingness and perception of
unemployed of the benefits of training and the possibility for them to get a job after the
training even though they have a chance to get a job, discrimination in the workplace
based on race, color, religion, ethnicity, age and class.

It can be seen from the above causes unemployment in a particular period can be a
combination of caused by social factors and how the economy as a whole works and also
due to the subjective individual factors. In a sociological point of view according to
functionalist and conflict theorists the unemployment is caused primarily by the social
factors than by the individual factors. However according to Max Weber and symbolic
interaction theories individuals construct their own social constructs and perception and
they can be subjective in their behavior and there fore can become unemployed even
though the actual condition they can get a job in the job market.

In summary applying the sociological and the primary causes of unemployment is

individual as well as a social problem in a market economy. As discussed above it is
caused by the society as well as by individuals. Even the economy or societal factors are
not present unemployment can be caused by individual perception and their own
subjective behavior.

ANOTHER EFFECT OF UNEMPLOYMENT IN INCREASE IN CRIME RATE

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Crime

Behavior or action that is punishable by criminal law. A crime is a public, as opposed to a

moral, wrong; it is an offence committed against (and hence punishable by) the state
or the community at large. Many crimes are immoral, but not all actions considered
immoral are illegal.

WHY THIS PROBLEM IS A PROBLEM?

Crime is a costly and demoralizing problem affecting all of us. The victims of crime
suffer injury, financial loss, and intimidation. Everyone is affected by higher prices
for products, taxes, insurance premiums, and the sense of insecurity and fear that
result from criminal acts. Those who live or work in "high crime" areas can be
deprived of some of life's normal opportunities and pleasures by the social and
economic impact of crime and by the alienation and despair that accompanies the
fear of crime.

Elements Necessary for a Crime to Occur

CRIME =α1 + α2 INJUSTICE + α3 INSECURITY + α4 µ

Above I have tried to mention at a glance that what is the relationship between injustice
and crime and insecurity and crime. Prior information says there exists positive
relationship among all these three variables. Whenever injustice increases crime
increases due to positive sign. For instance if we would have data and with the help
of that data alpha 2 says 0.25( figure from U.S. research) means, 1% increase in
injustice would lead to increase in crime by 25% on average. Unfortunately here we
have no data available in case of Pakistan.

α4µ

Reasons of crime other then insecurity and injustice like unemployment, political
environment and personal political interest, authority say of common man,
treatment of the accused, torture, and extra-legal use of force, disproportionate
representation of poor and marginalized populations, implementation of the laws,
huge influx of arms into Pakistan, education system in which classes are being
defined in this stage which give birth to inferiority complex, costs, include private
expenditures such as private security arrangements (e.g. bodyguards, watchmen,
security systems, etc.) and side payments to deter appropriation of ports (e.g. mafia
protection and bribes to local officials). The costs also include public expenditures,
ultimately financed through taxation, to prevent diversion (e.g. auditing of local
officials), and to prosecute and punish those who engage in such activities etc are
also the factors that are affecting crime positively and of course the government
expenditure on education, health, infrastructure, creating new jobs and other

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 development expenditure is very minimal which is in the way of producing skilled
labor with healthy environment and job. Cases of suicides due to unemployment
and hunger is increasing day by day by those who can found the way of doing
crime and get money.

INCREASE IN SUICIDE RATE: ALSO AN AFFECT OF UNEMPLOYMENT

Regardless of whom they affect, suicides are a tragic and puzzling phenomenon and to
ascertain the reasons why individuals so callously end their own lives is often very
difficult. On the global level, studies have shown that about one million people kill
themselves every year.
Studies on suicide trends, conducted by the WHO, show that in four large countries
alone, namely Brazil, India, Mexico and Pakistan suicide rates have increased on average
from 5 to 62 per cent over the past two decades.
Reasons reported for attempting suicide
Economic (Poverty, Unemployment): 192 (52%)
Social exclusion 117 (32%)
Failure in Love 40 (11%)
Police torture 3 (1%)
Mental disorder 9 (3%)
Not Reported 5 (1%)

Methods used by those who attempted suicide

Poison 145 (40%)

Pesticides 99 (27%)
Hanged 45 (12%)
Gun shot 40 (11%)
Sharp blade/Knife 8 (2%)
Drowning (Jumped in River/well) 7 (2%)
Burned 7 (2%)
Not Reported 1 (0.3%)

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District-wise & Rural/Urban distribution patterns of suicides in Sindh

Rural Urban
(percentage) (percentage)

Karachi 23 (35.9%)
Sanghar 56 (18.5%) Dadu 10 (15.6%)
Dadu 44 (14.6%) Larkana 10 (15.6%)
Larkana 31 (10.3%) Hyderabad 7 (10.9%)
Khairpur 29 (9.6%) Nawabshah 3 (4.6%)
Mirpur Khas 27 (8.9%) Shikarpur 3 (4.6%)
Hyderabad 27 (8.9%) Sukkur 2 (3.1%)
Nowshera Feroze 20 (6.6%) Khairpur 2 (3.1%)
Nawabshah 17 (5.6%) Malir 2 (3.1%)
Jacobabad 11 (3.6%) Badin 1 (1.5%)
Sukkur 9 (2.9%)
Badin 9 (2.9%) Nowshera Feroze 1
Ghotti 6 (1.9%) (1.5%)
Thatta 6 (1.9%)
Shikarpur 5 (1.6%)
Thar 4 (1.3%)
Karachi 1 (0.3%)

POVERTY IN PAKISTAN
Poverty in Pakistan, is a major economic issue. Nearly one-quarter of the population is
classified poor as of October 2006. The declining trend on poverty in the country seen
during the 1970s and 1980s was reversed in the 1990s by poor Federal policies and
rampant corruption. This phenomenon has been referred to as the "Poverty Bomb”. The
government of Pakistan has prepared an "Interim Poverty reduction Strategy Paper" that
suggest guidelines to reduce poverty in the country. According to the World Bank, the
program has had tangible success, with the World Bank stating that poverty has fallen by
5 percent since 2000.

As of 2006, Pakistan's Human Development Index is 0.539, higher than that of nearby
Bangladesh (0.530), which was formerly a part of Pakistan, but lower than that of
neighbouring India (0.611).

UNEMPLOYMENT STATISTICS OF PAKISTAN

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 Un-Employment Rates
1998 Census
Administrative 1981
Both
Unit Male Female Census
Sexes
Pakistan 19.68 20.19 5.05 3.1
Rural 19.98 20.40 5.50 2.3
Urban 19.13 19.77 4.49 5.2
NWFP 26.83 27.51 2.58 2.2
Rural 28.16 28.64 4.00 2.0
Urban 21.00 22.34 0.74 3.7
Punjab 19.10 19.60 5.50 3.2
Rural 18.60 19.00 6.00 2.5
Urban 20.10 20.7 4.70 5.0
Sindh 14.43 14.86 4.69 3.3
Rural 11.95 12.26 3.70 1.6
Urban 16.75 17.31 5.40 5.8
Balochistan 33.48 34.14 8.67 3.1
Rural 35.26 35.92 9.81 3.0
Urban 27.67 28.33 5.35 4.0
Islamabad 15.70 16.80 1.70 10.7
Rural 28.70 29.40 8.20 13.5
Urban 10.10 11.00 0.80 9.0

Some more statistics are as under:

Stats on Pakistan Poverty and Unemployment

According to the Human Development Report on South Asia, 2003:

• While less than one-third of Pakistan’s people are income poor, nearly one half
suffer from serious deprivation of several opportunities of life.
• Nearly two-third of the total adult population (and as much as three-fourths of the
adult female population) can’t read or write.
• Access to basic services like primary health care and safe drinking water is denied
to nearly half of the population. About 38 % of the children under five are
malnourished.
• The poverty in Pakistan has increased from 21% in 1990-91 to 35% in 1998-99.
• The number of poor as per government criteria, increasing at the rate of nearly 6
million per year now touches almost 58 million.
• Pakistan’s economy used to derive great benefit from expatriate labour abroad,
especially the Gulf countries. This was traditionally unskilled labour engaged in

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 the construction boom of the post-1973 oil price hike shock. However, the
opportunities for unskilled labour in Arab countries have been reducing due to the
economic changes taking place there.
• The number of Pakistani expatriates in the Gulf countries now hovers around one
million (compared to nearly 3.8 million Indians). The result has been reducing
remittances declining from over $2.5 billion in early 1980s to around $800
million by the end of the ’90s.
• Pakistan’s labour force is growing at the rate of 2.4%, and the unemployment rate
is growing at an alarming rate of 6% per annum in the last five years.
• Coupled with the decline in jobs abroad, the economy’s capacity to generate
employment opportunities has been decreasing, which can be figured out from the
low growth rates. With the high rate of population growth, the figure for
unemployed Pakistanis are likely to go up further.
• There is a mismatch in Pakistan in the supply and demand for skills. It’s basically
education levels in a country that creates employment skills; studies indicate that
Pakistan’s literacy rate is one of the lowest in the world and is worse the countries
which have per capita GNP equal to or close to Pakistan.
• Less than three-quarters of its school-age population attends primary school.
Expenditure on education as a percentage of GNP has been less than 3 % in the
last decade.

Unemployment in Pakistan 2002 - 2006

Year Unemployment
2006 6.5%
2005 6.6%
2004 8.3%
2003 7.7%
2002 7.8%

CONCLUSION
Unemployment in Pakistan today is prevalent at all levels. It does not spare the highly
qualified professionals any more be they doctors, engineers and MBAs. It hurts the

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illiterates, non-skilled, skilled, and educated and professionals alike. However, it hurts the
first two disadvantaged classes more than the others.
While the weekend editions of major national dailies appear to be full of ‘help-wanted’
advertisements they only tend to give a wrong picture of the unemployment situation.
Firstly, the majority of jobs advertised are aimed at the highly qualified professionals
whose share in the total employment is just 3.6 per cent. There are little or no vacancies
advertised for the two biggest occupational groups— skilled agricultural and fishery
workers whose share is 36.8 per cent and the elementary or unskilled workers whose
share is 22.9 per cent.

It is imperative that the government should come up with policies which address the issue
of unemployment in the country based on the global realities as only a faster growth in an
interdependent world economy can help put the jobless to work. While many measures
have been taken by the government to provide jobs to the people thousands still face
retrenchment not only in public sector but also in the corporate sector.

It is imperative to provide basic education to the young and retraining to the adults to
increase and upgrade employment. They should also be supported by increased and better
technical assistance, particularly the transfer of education technology.

REFRENCES
• Dawn. 2002. Suicide rate goes up in two years. Dawn. July 6, 2002.
• Asnis, A. 2001. Suicides on the rise. The News International. March 11, 2001.
• World bank, UNDP question poverty estimates in Pakistan

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• http://www.wcc-coe.org/wcc/what/regional/situation.html
• http://www.hvk.org/articles/0702/154.html
• www.wikipedia.org
• Source: Economic Survey 1998-99
• Human development report
• Pakistan economic survey
• www.undp.org

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22
Unemployment in Pakistan 2002 - 2006
Year Unemployment
2006 6.5%
2005 6.6%
2004 8.3%
2003 7.7%
2002 7.8%

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