Ayesha Saba

Pakistan's competitiveness relies on low wages, but this hinders labor productivity. Investing in human resources, enforcing labor laws, and promoting skill development can enhance the labor-market efficiency.

Talking to WealthPK, Dr. Sarah Ahmed, a labor market specialist, highlighted that low wages disincentivize workers from enhancing their skills or increasing output. She pointed out that keeping wages low in the name of competitiveness creates a vicious cycle of underinvestment in human capital. This cycle has hindered Pakistan from transitioning into higher-value industries that rely on skilled labor and innovation. A potential solution lies in improving the labor-market efficiency. Pakistan spends a mere 2.2% of its GDP on education, far below the global average for developing nations.

She suggested reallocating resources towards vocational training and technical education, particularly targeting the underrepresented sectors such as women and rural populations. By fostering a skilled workforce, the country could increase productivity across various industries, thus moving away from the low-wage dependency. Muhammad Mugheez Farooq, Energy Auditor at the National Productivity Organization (NPO), said the overall macro environment and political significance casts a great impact on productivity and GDP growth. The level of factor productivity, or simply productivity, is one of the most important factors in determining a country’s competitiveness on the international market.

He said, “Pakistan’s slow growth rates of output can be attributed to lack of innovation, low investment, technology inefficiencies, and limited research and development. To achieve industrial growth, we must optimize our productivity tools, including our human resources, technology, and processes of various industrial value chains. The intended outcome is to enhance our trade with the rest of the world.’’ “There is a need for professional training and awareness to provide skilled manpower according to the requirements of the labour market in the country. This will contribute significantly to the growth of industries. The private sector should be encouraged to expand its involvement in skills training,” he said.

“We have put some real efforts to achieve the maximum with a more focused approach in which the main objective is to enhance total factor productivity (TFP) through human resource development (HRD), technology demonstration, and improved practices, processes, and procedures so as to compete effectively in the local and global markets,’’ he added. Mugheez said, “NPO is also developing a key initiative through which the organization and its stakeholders will continue to reap benefits in years to come, which includes Rs77 million Launching Productivity Movement in Pakistan through the PSDP-approved project ‘Improving Competitiveness through Sustainable National Productivity (SNP)’.”

Credit: INP-WealthPk