oday Pakistan stands at one of its most interesting crossroads. More than 60 per cent of its population falls under the age of 30, making it one of the youngest countries across the globe. This profile is often described by economists as a demographic dividend, a period where the prime segment of the population has the potential to drive accelerated economic growth and productivity. Add to this mix a steadily rising literacy rate and internet penetration in 70 per cent of all households, and the final product, theoretically at least, seems to be a labour market that is efficient, globally acclaimed and at the top of its game.

Unfortunately, on-ground reality is different.

The recent Labour Force Survey by the Pakistan Bureau of Statistics indicates an unemployment of 7.1 per cent, the highest in 21 years, and a labour force participation of just 46.3 per cenrt; one of the lowest in the region. Since 2020-21, almost 1.4 million individuals have been added to the unemployment pool. Despite a visibly large pool of job seekers with the resources and knowledge to enter the labour force, employers across various sectors – from information technology, manufacturing and sales to logistics - struggle with hiring the right workers.

A part of this confusion is owed to the recent shift in metrics. Pakistan shifted this year to a new international labour definition given under the 19th International Conference of Labour Statisticians. The move has impacted comparability with previous years. Planning Commission has noted that these changes, including the treatment of subsistence agricultural workers, have made an impact on the considerable shift in measured unemployment.

This only shows that the numbers tell only part of the story. Importantly, these numbers conceal troubling stress factors.

The large youth demographic that appears to be one of Pakistan’s greatest strengths is, in fact, the one most plagued by unemployment. PBS youth tables highlight that amongst individuals between the ages of 15 and 24, unemployment sits at 12.8 per cent. Young women face even higher rates. Exclusion of the youth, either through lack of work or working low-quality jobs, negatively impacts their ability to accumulate practical skills, eventually weakening lifetime earnings for individuals and translating into long-term productivity constraints for the labour market.

The question then is: why?

The answer lies in an analysis of the quality of education in the country. According to the Pakistan Institute of Development Economics, graduate unemployment in the country is a staggering 31 percent. Even more graduates are underemployed. The problem, therefore, is not merely a shortage of jobs. There is a disconnect between what the education system produces and what the market demands.

Educational institutes must work more closely with employers to redesign the curricula around practical workplace competencies.

Year after year, Pakistan has produced more degree holders, but the market pays for work-readiness, applied competence and role fit, not simply time spent in classrooms. Naturally, then, vacancies and unemployment coexist.

PIDE findings clearly demonstrate a disconnect between general education and occupational competence. Employers hire with work readiness in mind. Companies are not short of applicants for any given role. Where most candidates fall short is demonstrating task accuracy, digital comfort, the ability to operate within structured corporate systems and communication clarity. This gap can be traced back to a lack of foundational development. At least 28 per cent of children in Pakistan aged 5-16 are out of school. This means that at the critical age when the need to create language, numerics and discipline fundamentals is imperative, the average child is focused elsewhere, limiting their potential for adaptability later in life.

Informality compounds the problem. PBS data indicates a high share of informal employment, even outside agriculture. This weakens documentation, standardisation and credibility of work experience. Employers rely on proxies and costly screening mechanisms because skill signaling lacks consistency. For job seekers, the market feels saturated. For employers, it feels thin.

At the administrative level, the focus must shift from simply counting enrolments to measuring specific outcomes. There is a dire need to implement a national skills dashboard that classifies by city, sector and occupation, allowing policymakers to identify the real pressure points. Instead of attendance, public funding needs to take into account wage progression, successful placement and retention of individuals.

At the same time, certification frameworks must be standardised, allowing employers to trust these credentials. For the informal workers, simplified pathways must be implemented ensuring that their experience becomes quantifiable and equitable.

Simultaneously, educational institutes must work more closely with employers to redesign curricula around practical workplace competencies. Mandatory internships, employer-led projects and treating professional discipline, communication and digital fluency as core competencies is the need of the hour. Individuals themselves must also prioritise real-life demonstrable skills, command over digital tools and reliability over superficial credentials.

Pakistan’s challenge is not a single crisis. It is a structural misalignment. Correcting it is not merely labour reform; it is an economic competitiveness imperative.

The writer is the chief commercial officer at HRSG, an organisation providing competency-based talent management solutions