Poverty and Unemployment Surge Amid Economic Turbulence in Pakistan

Islamabad: Pakistan’s economy is grappling with an unprecedented crisis, marked by a surge in poverty and unemployment, according to a statement by Shahid Rasheed Butt, a notable business leader and former president of the Islamabad Chamber of Commerce and Industry. The country faces the dual challenge of low economic growth and persistently high inflation, which has severely impacted incomes and led to alarming poverty levels.

Official data reveals that the unemployment rate has reached a historic high of over 22 percent, significantly impacting real wages for millions of workers. Over the past three fiscal years, the average GDP growth has been a mere 1.7 percent, insufficient to provide jobs for the nation’s labor force of nearly 85 million. Economic contraction in 2022-23, due to devastating floods, has left recovery efforts weak.

Four critical labor-intensive sectors—agriculture, manufacturing, construction, and wholesale and retail trade—employ over 75 percent of the workforce. However, three of these sectors experienced negative growth, with manufacturing shrinking by 0.3 percent, construction by 1.6 percent, and wholesale and retail trade by 0.2 percent. Agriculture saw modest growth at 3.1 percent.

The 2023 population and housing census reported 66.2 million employed individuals compared to nearly 18.8 million unemployed. Unemployment has risen over 12 percentage points since 2017, contributing to a poverty rate that has surged to 44 percent. Many unemployed individuals have likely fallen below the poverty line due to the absence of earned income.

For those still employed, maintaining living standards has become increasingly difficult, as inflation has outpaced wage growth. Over the last three years, the average inflation rate exceeded 19 percent, with 2022-23 alone witnessing a record 29.2 percent. In sectors like construction, the wage index rose by about 30.5 percent from June 2022 to June 2025, while consumer prices surged by 50.7 percent, resulting in a more than 20 percent drop in real wages.

Service workers in low-income sectors have faced similar declines. Real wages for household servants and garbage collectors fell by 19.4 percent and 18.2 percent, respectively. Meanwhile, prices for services catering to wealthier households, such as healthcare and personal grooming, have increased in real terms, exacerbating income inequality.

Experts emphasize that reversing these trends requires robust economic growth. While the government aims for a GDP growth target of 4.2 percent for 2025-26, analysts caution that sustained growth of at least 5 percent is necessary to create sufficient jobs and reduce poverty.