During his recent visit to Pakistan, World Bank President Ajay Banga delivered a stark assessment of the country’s economic outlook, placing the spotlight firmly on employment generation as the defining issue of the coming decade. With one of the youngest populations in the world steadily entering the labour force, Banga cautioned that Pakistan must generate between 2.5 and 3 million jobs every year, amounting to roughly 30 million new jobs over the next ten years. Failure to meet this threshold, he warned, could push the economy toward severe strain, deepen social instability, and accelerate the outward migration of young Pakistanis seeking livelihoods abroad. What could otherwise be a powerful demographic advantage risks turning into a persistent economic burden.
The scale of the challenge is rooted in the country’s population structure. Around 80 percent of Pakistan’s population is under the age of 40, while nearly two-thirds are younger than 30. This youth-heavy demographic is colliding with a labour market already under pressure. According to the latest Labour Force Survey, unemployment has climbed to a 21-year high of 7.1 percent, underscoring the widening gap between the number of people seeking work and the economy’s ability to absorb them productively. As more young people enter the workforce each year, the cost of inaction compounds, both economically and socially.
Against this backdrop, Banga’s characterisation of the situation as a “generational challenge” resonates beyond rhetoric. Pakistan is no longer grappling with a marginal development concern but confronting a structural test that will shape economic performance, institutional credibility, and social cohesion for decades. The ability to skill, employ, and productively integrate a rapidly expanding youth cohort will determine whether the country can sustain growth or remain locked in cycles of underemployment and low productivity.
Equally important is the framework Banga has outlined to address the crisis. He has argued that large-scale job creation must rest on three interconnected pillars. The first is sustained investment in human capital and physical infrastructure, without which productivity gains remain limited. The second involves regulatory reforms that lower the barriers to starting, operating, and expanding businesses. The third is the expansion of access to financing and insurance, particularly for small and medium-sized enterprises and the agricultural sector, which together account for a significant share of employment but remain largely excluded from formal credit channels due to their informal nature.
At the centre of any durable solution lies human capital development. Short-term employment schemes or stopgap measures cannot absorb millions of new workers year after year. What is urgently required are education and training systems that align skills with actual market demand. Yet vocational and technical education has long occupied a secondary position in policy planning, despite its relevance to labour-intensive sectors. Strengthening and expanding polytechnic institutes and skills development centres across the country is critical to building a workforce capable of meeting the needs of modern industry.
Properly designed and adequately funded, such institutions can function as engines of workforce readiness, feeding skilled labour into construction, manufacturing, agriculture, and emerging industrial segments. Closing the skills gap would not only improve employability but also raise productivity and competitiveness across key sectors of the economy, creating a more resilient employment base.
Access to finance remains another binding constraint. As Banga has highlighted, SMEs and farmers are central to job creation, yet their growth is stunted by limited access to credit and insurance. Encouraging formalisation is essential to unlocking financing, but this transition is often discouraged by a dense web of legal, regulatory, and tax-related hurdles. Complex labour laws, social security obligations, EOBI compliance requirements, and a taxation system characterised by turnover-based minimum taxes and layered withholding rates collectively raise the cost of doing business.
These structural frictions not only deter informal enterprises from entering the formal economy but also restrict the expansion of businesses that are already compliant, limiting their capacity to hire and invest. Without meaningful reform in these areas, the foundations of an inclusive and scalable job-creation strategy remain weak.
If these challenges are not addressed with urgency and coherence, Pakistan risks squandering its demographic potential. An underemployed youth population and a sluggish labour market would leave the economy well short of its growth ambitions, reinforcing instability at a time when opportunity, if managed wisely, remains within reach.
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