Key takeaways
- Two to 2.5 million young people enter Pakistan's labour force every year.
- More than 70% of employed youth work in informal, low-productivity jobs.
- Over 60% of firms cite skills gaps; education spending is about 2% of GDP.
- Fewer than 5% of young people can access formal credit to start a business.
- Export manufacturing, IT and construction offer the largest job multipliers.
In this Paradigm Shift column (January 2026), Dr. Ghulam Mohey-ud-din warns that Pakistan’s demographic dividend is turning into a demographic risk. The country’s young population will either power growth or strain social stability, and the outcome depends on jobs.
The argument
More than two-thirds of Pakistanis are under 30, and Pakistan Bureau of Statistics labour surveys show two to 2.5 million young people entering the workforce every year. Youth unemployment runs at around 11 to 12 percent, and more than 70 percent of employed young people work in informal, low-productivity activities that pay little and add little to growth.
Education has expanded without producing job-ready graduates. Rote learning still dominates, vocational training is thin, and public spending on education is about 2 percent of GDP, well below the 4 to 6 percent international benchmark. World Bank enterprise surveys find more than 60 percent of firms citing skills gaps. The productivity consequence is stark: the column notes that Vietnamese workers are now two and a half to three times as productive as Pakistani workers, although the two countries had similar incomes two decades ago.
Entrepreneurship is not a mass solution when fewer than 5 percent of young people can access formal credit. The frustration shows up in emigration, with more than 860,000 Pakistanis leaving for work abroad in 2023, and in the IMF’s warning that young populations with low participation carry political risk.
What needs to change
- Prioritise export manufacturing, IT services and construction, which create the most jobs per rupee invested.
- Reform curricula around market demand and expand technical and vocational training.
- Remove regulatory barriers to formal hiring and build apprenticeship pipelines with employers.
- Back high-potential, scalable firms rather than promoting entrepreneurship for its own sake.