Abstract:
This study is an attempt to analyze the youth labour market activities and outcomes in Pakistan.
Based on micro data of Labour Force Survey (2006-07), the strength of analysis presented in the
study is twofold. First, it presents a comprehensive descriptive analysis of youth labour market at
provincial and country level. Second, the econometric analyses describe the determinants of
youth activities, employment probabilities, wage, employment status and supply of working
hours in Pakistan. Moreover, a comparison between youth, child, and adult labour market
outcomes is also made to judge the relative position of youth in the labour market. One of the
main contributions of the study is that it tests the link between educational attainment and youth
labour market outcomes in Pakistan. More specifically, we set the human capital theory not only
in terms of wage equation but also extend it to analyze the impact of human capital on
probabilities of employment, employment status choices and decision of hours worked. Our
results confirm the hypothesis that increase in the level of education increases the earnings of
individuals. Surprisingly, however, we find higher probabilities of unemployment among
educated youth in Pakistan. Further analysis shows that lack of proper skills and experience,
higher expectations about job and earnings, predominance of the informal economy (which is
highly biased towards unskilled low wage labour) are the main factors that may contribute to the
higher unemployment among the educated youth in Pakistan. Results show that young people
with higher education level are more likely to be an employee instead of self-employed. On the
other hand, youth with low level of education are more likely to be self-employed and less likely
to work for normal hours. Another important contribution of the study is the analysis of youth
labour market based on usual status approach. We find large differences between unemployment
rates based on weekly status and usual status approaches. The main reason of such differences is
the selection of one week reference period which greatly undercounts the extent of unemployed
people in the country. The study shows that a significant percentage of young people start their
career early and are vulnerable in the labour market. Moreover, a substantial percentage of youth
is neither in labour force nor enrolled as student which shows the wastage of human resources in
the society. To empirically investigate the youth labour market outcomes, the study uses two
types of econometric techniques, logistic and multinomial logistic regression analyses. Our
results suggest that youth living in rural areas are more likely to participate in economic
activities, work in informal or agricultural sector, work for fewer hours and are less likely to be
unemployed or enrolled as a student as compared to their urban counterparts. In general, being a
female reduces the chances of employment or full-time student, and increases the chances to
remain in the vulnerable employment throughout the working life. Our results show that age,
sex, marital status, migration, training, location, employment status, education level and
characteristics of head of household have significant impact on youth labour market activities
and employment probabilities. Similarly, young people living in households with better
employment status and education of the head of household are more likely to enroll as a student
instead of being engaged in informal and low paid activities. Results of the multinomial logit
estimates for supply of working hours suggest that chances of working for excessive hours
increase if the young person is male, living in urban areas or have status of employer or self-
employed. At the end, study makes some recommendations that youth in Pakistan cannot be
considered as a homogeneous group, their preferences and opportunities of work depend upon
their age, sex, marital status, education level and family structure. Therefore, the needs of youth
must be addressed in a comprehensive manner keeping in view their educational, social and
labour market requirements in different regions of the country.