GDP GROWTH, UNEMPLOYMENT, POVERTY AND INEQUALITY

 At the macro level, the economic growth implies greater availability of public resources to improve the quality and quantity of education health and other services. On the other hand at the micro level economic growth creates employment, opportunities, increase the income of the people and therefore reduce poverty. The countries that have achieved high economic growth over a long period of struggle have seen a lasting reduction in poverty. In a world of six billion people, one billion have 80 percent of the income and five billion have less then 20 billion. In the next 25 years two billion more people will be added in the world of poverty and 50 million of them will be in the developing countries.

 Pakistan had launched the poverty reduction strategy in fiscal year 2001. The main focus of this strategy is in accelerating economic growth and maintaining macroeconomic stability, investing in human capital augmenting targeted interventions; expanding social safety net with and improving governance.

 The latest estimate of inflation adjusted poverty line is Rs. 878.64 per adult equivalent per month—up from Rs. 723.40 in fiscal year 2001. Head count method is used to find out the status of poverty in an economy. According to head count method the over all poverty is decreasing from 34.46 percent to 23.90 percent there is a decrease of 10.56 percentage point. While the poverty gap between rich and poor is decreasing by 2.27 percentages point that 7.03 percent in fiscal year 2001 to 4.76 percent in fiscal year2005. In urban areas the headcount ratio tells that the poverty is decreasing with 7.79 percentage point that us from 22.69 percent in fiscal year 2001 to 14.9 percent in fiscal year 2005 and the poverty gap is decreases from 4.55 percent to 2.87 percent that is the decrease of 1.68 percentage point from fiscal years of 2001 to 2005. on the other hand the headcount method in rural areas shows that the poverty is decreases from 39.26 in fiscal year 2001 to 28.1 percent—a decrease of 11.16 percentage point and poverty gap is reduces up to 8.04 percent in fiscal year 2001 to 5.64 percent in fiscal year 2005 a decrease of 2.4 percentage point. The above static tells that the poverty in rural areas reduces faster then the poverty reduces in the urban areas, and the poverty line is increases from 723.40 percent in fiscal year 2001 to 878.64 percent – there is an increase of 155.24 percentage points. All of above shows a strong economic growth and thus there is a reduction of poverty in Pakistan.

 
Poverty Indicators 2001 and 2004-5  
    HEADCOUNT
 
 POVERTY LINE
 SEVERITY OF POVERTY  
   
2001  
 
2005  
 
2001  
 
2005  
 
2001  
 
2005  
 Pakistan    
34.46  
 
23.9  
 
7.03  
 
4.76  
 
2.13  
 
1.48  
 urban    
22.69  
 
14.9  
 
4.55  
 
2.87  
 
1.35  
 
0.84  
 rural    
39.26  
 
28.1  
 
8.04  
 
5.64  
 
2.44  
 
1.77  
poverty line  
 723.4    878.64          

 

Inequality: the inequality of any economy is measured by Gini Coefficient and the ratio of the highest to the lowest quintile. The Gini Coefficient has only two values that are 0 and 1 and higher the values of Gini Coefficient greater will be the inequality. The trend of Gini Coefficient shows that there is an increase in the inequality in the economy. The empirical evidence shows that the consumption is increasing while the growth rate is decreasing because of decrease in an absolute poverty.

 
Comparative Poverty Profile 2001 and 2004-05  
 Percentage of Population  
   2001    2004-05  
 Extremely poor    1.1    1  
 ultra poor    10.8    6.5  
 poor    22.5    16.4  
 vulnerable    22.5    20.5  
 quasi Non-poor    30.1    35  
 Non-Poor    13    20.5  

 

 The inequality in urban areas is higher then rural areas there is a difference of 0.086 percentage points. During the fiscal year 2001 to 2005 the inequality of urban areas is increased by faster pace as compared to the rural areas, this is because the labor in the urban areas is more diversified in term of skilled and education as compared to the labor of rural areas. Therefore the wages are distributed according to someone’s self skill and education, while in the case of the labor of rural area all the labor force has to perform an equal or homogeneous task. In urban areas there us a wide range of self employment therefore the income if self employment varies according to the nature of job while in the rural areas the bulk of self employed has to work in homogeneous sector.

Gini Coefficient and consumtion shares by quintiles
PIHS 2000-01
HIES 2004-05
Urban
Rural
Pakistan
Urban
Rural
Pakistan
Gini Coefficient
0.3227
0.2367
0.2752
0.3388
0.2519
0.2976
Consumtion shares by quintiles
Quintiles 1
5.3
12.8
10.1
4.8
12.6
9.5
Quintiles 2
8.1
16.9
13.7
7.6
17.1
13.2
Quintiles 3
12.1
19.5
16.8
11.6
19.7
16.4
Quintiles 4
19.4
22.4
21.3
18.3
23
21.4
Quintiles 5
55.1
28.4
38
57.7
27.6
39.4
Ratio of highest to lowest
10.4
2.22
3.76
12.02
2.19
4.15
Source: CRPRID/Planning Commission

 

 The Gini coefficient is a broad single aggregate measure. It suppresses the profit of the distribution. The percentage share of expenditure shows that overall inequality, in Pakistan has increased marginally but relatively more in urban areas as compared to the rural areas. The gap between the poor and richer become widened to some extant from 3.76 in fiscal year 2001 to 4.15 in fiscal year 2005 by the ration if 0.4 percentage point. At regional level the gap between poor and rich has winder in urban areas is more rapidly then in rural areas that is increase from 10.40 in fiscal year 2001 to 12.02 in fiscal year 2005 at the ratio of 1.62 percentage point but n rural areas this gap is decreasing from 2.22 in fiscal year 2001 to 2.19 in fiscal years 2005 with the decline of 0.03 percentage point. Therefore we can say that the gap between the rich and the poor in rural area is decreasing while it is increases in the urban areas.

 Year    Unemployed Labor Force   Unemployment Rate (%)
 Total    Rural    Urban    Total    Rural    Urban   Total
 1995    1.83    1.18    0.65    11.7    4.8    6.9  
 1996    1.88    1.22    0.66    11.7    4.8    6.9  
 1997    2.29    1.47    0.82    12.82    5.65    7.17  
 1998    2.31    1.36    0.95    12.93    4.98    7.95  
 1999    2.36    1.39    0.97    12.93    4.98    7.95  
 2000    3.16    1.98    1.18    16.86    6.94    9.92  
 2001    3.22    2.01    1.21    16.86    6.94    9.92  
 2002    3.55    2.2    1.35    17.35    7.55    9.8  
 2003    3.62    2.25    1.37    17.35    7.55    9.8  
 2004    3.52    2.09    1.43    16.44    6.74    9.7  
 2005    3.52    2.09    1.43    16.44    6.74    9.7  
 2006    3.32    2    1.32    14.1    5.7    8.4  

 

 Unemployment: unemployment is define as all the persons ten years of age and above who wants to do work but has no work to do. About 3.32 million people were estimated to be unemployed during the first half f the fiscal year 2005-06 as compared to the 3.52 million in 2003-04. The employment condition of Pakistan is so much pathetic. The overall unemployment in Pakistan economy was gradually increases from fiscal year 1995 to 2003 and then there is a decreasing trend in unemployment condition of Pakistan from fiscal year 2004 to 2006. The unemployment rate in the year 1995 is 11.7 percent that is 1.83 million people was unemployed during that time which is increasing in 1996 as there us an increase of unemployment in 1.88 million. This unemployment is further increasing till 2003 with 3.52 million people was unemployed. Then the overall unemployment in the economy shows decreasing trend. Same the case is in rural and urban areas.

(Muhammad Aamer Shahzad)

 

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