November 17, 2003	Monday	Ramazan 21, 1424

Unemployment in the world, except in areas marked for low wages for high tech jobs, may increase, judged by the current global trends.

The US which has an unemployment rate of 6.1 per cent against 5.7 per cent a year ago and the Euro region which has an unemployment rate of 8.8 per cent against 8.5 per cent a year ago, may lead the world in aggravatig the unemployment crisis.

Japan’s position has instead improved as it has an unemployment rate of 5.1 per cent against 5.4 per cent a year ago following its economic recovery, although both rates are far removed from its traditional unemployment rate of 3 per cent When it practised its philosophy of life-time employment.

What is remarkable is even after their recovery from recession and resumption of economic growth the employment rate is not improving markedly in the US or Europe, which has both bright and dark patches. The developing countries have invariably been plagued by large scale unemployment and under-employment, and they are affected by the economic health of the developed countries to whom they export their products. Hence the economists talk of the jobless recovery which is going to be a marked feature of the world, including the developing countries.

Although recession in the US came to an end 23 months ago, two million more Americans are unemployed today than before. And the number of the unemployed in the US is far more now then when George Bush became the president in 2001. Hence unemployment is becoming a major election issue. If so far they have been blaming China for taking away their jobs by exporting its goods very cheap to the US, now they are blaming India for taking away the high tech jobs as US companies outsourcing their work to high tech companies in India.

A major reason for such increasing unemployment is the spread of globalization. Companies in the West want to get the goods and services they need cheap while the wages in their own countries are high. That is being done now for more than before. And the domestic companies with their high-cost labour and services suffer and lose their business.

There is also the compulsion on the chief executives of companies in the west to show large profits. The share-holders insist on that. Chief executives who cannot produce such results are changed quick or their companies merged with others. So, cutting the cost or trimming the corners is the eternal pre-occupation of the managers, and in that endeavour they do not want to be limited by their national boundaries.

A study was made in the US to determine whether the use of digital technology had rendered more workers jobless. And that showed while such equipment could be used upto 84 per cent of its capacity, the actual use is under three-fourth of its capacity. So it is not the principal culprit in causing such unemployment.

Large scale mergers in the US and west as a whole have reduced the number of workers needed. There had been a pause after the mega mergers of the 1990s and they have been resumed now. Such mergers also affect their employees in the developing countries where they have their subsidiaries, particularly in the pharmaceutical sector. In Karachi, the number of foreign pharmaceutical companies functioning has become small as a result of this process, which may continue.

The IT industry in the US which had its serious set-backs at home is now outsourcing its work to countries like India, China and the Philippines a great deal. Major companies like General Electric, Honeywell and Citi group have been doing that for years together now.

Intel chairman Andy Grove told a software conference in the US last month that a huge number of IT jobs could move from the US to countries like India and China in the next decade. The latest study showed that such outsourcing has increased within year by 83 per cent.

Hence there have been protest demonstrations by the Communication Workers of America, the organization for the rights of American workers and others, in San Francisco and New York. Indian companies in the US are perturbed by the agitation and they have hired the high powered lobbying firm of Hill and Knowlton to project their interests.

Outsourcing high tech work to India is estimated to have saved the US $10 billion to $11 billion. Although in an election year there will be strong campaigns against such outsourcing but the Indian lobby’s large financial contribution to political parties is expected to soften the attacks on India.

Striking increase in the US productivity is another reason for unemployment. In the last five years U.S labour productivity has increased by 3.3 per cent per year and some experts project during the next ten years productivity will increase by 3.4 per cent. And that could increase the wealth of the US and double the real income of the Americans in 28 years instead of 50 years, says the “Economist” of London.

Unemployed American high tech workers say that in the past the US used to attract the best Indian talent cheap and now the American companies are sending their work out to India.

Japan too has begun outsourcing its work to remain competitive in the international markets, western Europe is sending out its work to East Europe. France is reported to be setting up companies and Call Centres in Francofon countries in Africa to outsource its work.

Pakistan could have benefited by such outsourcing if we had better IT talent in plenty, and if we had established a reputation as an IT centre as Bangalore as India has done. Instead we have produced too many half-baked IT specialists through sub-standard IT institutes. Hence we are out of the big race.

Pakistan, too, has the jobless economic recovery problem, Around $2 billion have been invested in modernising and expanding the textile industry. But the workers employed by the industry have not increased.Instead the workers are being thrown out following the abnormal rise in the price of cotton.

The other major sector is drilling for oil. That, too, does not need many workers.

The fact is machinery for such industry is made abroad on the basis of economising on workers. That makes the machinery cost far more and we have to pay all that. Hence each textile mill needs fewer and fewer workers than it needed in the earlier days.

Europe has a negative population growth problem in many countries. Almost the same holds good of Japan; but Pakistan has a population of 146 million people, and a third of them need employment to feed others. So Pakistan has to make more rapid progress that it has been making by investing far more and creating for more jobs.

Small and medium industries is one way of doing that at a low investment cost. But we are slow in organizing such enterprises and making them totally productive.

But regardless of the de-merits of globalization we are not able to stop that or slow that down. Hence we have to try to get the best out of that by trying to be among the best in this game of survival of the fittest.