Pakistan is facing a major employment crisis. According to the latest Economic Survey 2025-26, the working-age population in the country increased from 159.8mn to 179.6mn, reflecting Pakistan’s expanding labour supply.
The employed labour force also rose from 67.25mn to 77.2mn, indicating an increase in employment opportunities during the period. At much the same time, the number of those without jobs also increased, from a low of 4.51mn to a high of 5.9mn - the unemployment rate rising from 6.3% to 7.1%, in the process highlighting the need to further accelerate job creation in line with labour force growth.
The unemployment rate of 7.1% is the highest in over two decades in Pakistan. The report further stated that poverty increased from 22% in FY2019 to an 11-year high of 29% in FY2026 and income inequality hit a 27-year high as real incomes and household consumption declined over the past seven years.
The extent of the crisis was highlighted in a report filed by Arab News in July this year. The newspaper highlighted cases such as that of one Maria Ismail, a female journalist who has been searching for a job after losing the one she had for years. She said she has been surviving on her savings like millions of other Pakistanis, uncertain how much longer they will last.
According to the report, Pakistan’s Finance Adviser Khurram Schehzad did not entertain Arab News’ requests for comment on growing unemployment in the country, Pakistan's Finance Minister Muhammad Aurangzeb in June having stated that the government had been able to achieve a “broad-based” economic rebound in FY2026 despite the ongoing conflict in the Middle East.
Ubaidullah Shareef, a member of the Salaried Class Alliance of Pakistan (SCAP) advocacy group, instead told Arab News that a limited industrial expansion and the departure of multinational companies had constrained employment opportunities in the country.
In an interview with Reuters earlier this year, World Bank President Ajay Banga said that Pakistan must create up to 30mn jobs over the next decade to turn its youth bulge into an economic dividend, or risk instability and outward migration - the proverbial 'brain drain' many countries in Asia have seen over the past decade.
Pakistan needs to generate 2.5mn to 3mn jobs a year, roughly 25 to 30mn over the next decade, as millions of young people come of age, Banga said. Failure to do so may result in illegal migration or internal instability.
Pakistan's job strategy rests on three pillars, Banga continued: investment in human and physical infrastructure, business-friendly regulatory reforms, and expanded access to financing and insurance, particularly for small firms and farmers that typically lack bank credit. Infrastructure, primary healthcare, tourism and small-scale agriculture are labour-intensive sectors with the greatest employment potential, he said, adding that farming alone could account for about one-third of the jobs Pakistan needs to create over the next 25 years.
Align skills development with labour market demand
The International Labour Organisation (ILO) on July 27 called on Pakistan to overhaul its skills training system to better meet employers’ needs as digitalisation, artificial intelligence (AI) and climate change reshape the world of work.
In a note following a high-level roundtable in Lahore marking World Youth Skills Day, the ILO highlighted the challenge of integrating young people into the workforce, with 28.4% of the country's youth neither employed nor in education or training.
Pakistan has an estimated 46.3mn people aged 15–24, of whom 20.6mn participate in the labour force, according to the Pakistan Labour Force Survey 2024–25. Of these, 2.6mn are unemployed, putting the youth unemployment rate at 12.8%, nearly twice the overall rate of 7.1%.
While the proportion of young people not in employment, education or training has dropped from 32.5% in 2020–21, it remains at an elevated level at 28.4%, leading to a quarter of the youth population without work or access to education and training.
The survey states that 4.9mn young people aged 15–24 have received technical or vocational training, including 3mn men and 1.9mn women. The figures point to the need to expand access to training, particularly for young women, while improving the transition from skills acquisition to sustained employment.
According to Geir Tonstol, director of the ILO Country Office for Pakistan, “Pakistan needs a training ecosystem that keeps pace with industry, supports innovation and prepares young people for jobs that are emerging today, not yesterday. Strengthening collaboration between government, industry and development partners is essential to ensure that skills investments translate into higher employability, greater productivity and stronger economic growth.”
One of the most important highlights that came out of the discussion was the need for better coordination and cooperation between employment generators and institutions that offer training. There is also a requirement for greater dependence on data pertaining to the labour market and more focused investment in skills training for sectors with the potential to create productive jobs, they said.
Participants also stressed increased investment in lifelong learning to help workers refresh their skills as technologies and employer needs change.
“Skills development must respond not only to AI, digitalisation and the green transition, but also to the structural constraints that affect enterprises and workers alike,” said Ahmed Khan, chief executive officer of the Punjab Skills Development Fund (PSDF).
“Productivity, innovation and decent work must be at the centre of the national skills agenda. When productivity rises, enterprises become more competitive, workers can earn better wages and economies grow more sustainably,” he said.