OpinionPrint edition: 2026-09-15
The skills crisis behind Pakistan’s low productivity
PublishedSeptember 15, 2026UpdatedSeptember 15, 202605:22am
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Pakistan often talks about its young population as an economic dividend. It is an attractive idea.
About 2/3rd of the population is under 30, giving the country a large potential workforce. But a young population is not an advantage by itself. It becomes an advantage only when young people can do productive work, earn better incomes and help the economy grow. That is where Pakistan’s real challenge lies. Not a shortage of people, but a shortage of the skills needed to make growing number of youth more productive.
The problem starts well before a young person enters the labour market. According to the Pakistan Economic Survey 2025-26, literacy among population aged 10 and above was 63 percent in FY25, with a significant gender gap: 73 percent for males compared with 54 percent for females. ASER Pakistan’s 2025 survey offers an even sharper warning.
In Punjab, while 94 percent of children aged 6–16 were enrolled in school, only 18 percent of Grade 3 children could read a Grade 2-level story in Urdu and just 10 percent could solve a two-digit division problem.
The lesson is clear. Vocational reform cannot compensate for weak foundations. If children leave primary school without basic literacy, numeracy and problem-solving skills, later training will always have limited returns. Skills policy must, therefore, begin in the classroom, not at the technical institute.
The economic stakes are high. Pakistan scored 130 out of 325 on the World Bank’s latest Human Capital Index Plus, compared with 147 for Bangladesh and 153 for the lower-middle-income average countries.
The World Bank estimates that closing this gap with better-performing peers could raise future incomes by 68 percent. That should make skills reform an economic priority rather than simply an education-sector concern. Pakistan’s technical and vocational system also needs to be judged differently.
Enrolment in technical and vocational institutes was estimated at about 462,500 in FY25, only modestly higher than 453,900 two years earlier. But the more important question is not how many seats exist. It is what happens after training. Do graduates find jobs? Do employers value their skills? Do their earnings rise? A system that counts certificates but cannot demonstrate these outcomes is measuring activity, not impact.
This is also why the debate around unemployment and skills needs more nuance. A graduate without a job is not necessarily unskilled; there may simply be too few suitable jobs. Conversely, employers may struggle to recruit people with the practical capabilities they need.
Pakistan needs better labour-market information to connect these two sides. Students should know which occupations are growing, training institutions should know what employers need, and policymakers should be able to see where shortages are emerging. Digital skills need the same practical approach.
Pakistan does not need every worker to become an IT expert. A shopkeeper, machine operator, accounts assistant and factory supervisor each need different digital capabilities. The objective should be broad digital literacy, combined with specialised training where industries actually require it.
Overseas employment illustrates the opportunity. Bureau of Emigration data show that about 762,500 workers registered for overseas employment in 2025. Around 61 percent were classified as unskilled, 29 percent skilled and 5.5 percent semi-skilled.
Highly qualified and highly skilled workers together accounted for only 4.2 percent. These figures also reflect destination-country demand, visa restrictions and other factors, so they should not be read as a pure measure of Pakistan’s skills gap. Still, the direction is clear.
Better-recognised qualifications, language skills and practical training could help Pakistani workers compete for higher-paying opportunities. The goal should be to increase the value of overseas employment, not simply the number of departures.
The same logic applies at home. Foreign investors do not come to Pakistan only for inexpensive labour. They need technicians, supervisors, managers and local suppliers who can meet quality, reliability and productivity standards. If Pakistan wants to move beyond low-value exports, it needs a workforce capable of producing higher-value goods and services. Skills policy can, therefore, be part of industrial policy.
Training should be designed around the capabilities needed in priority sectors, industrial clusters and export markets.
There are useful lessons abroad. Vietnam’s experience shows how strong basic literacy and numeracy can help workers move from agriculture into more productive employment.
Malaysia’s Penang Skills Development Centre offers a particularly relevant model: industry, government and education providers work together, allowing companies to share training infrastructure, equipment and expertise.
Türkiye has linked vocational curricula and qualifications more closely to labour-market needs, while South Korea’s Meister schools have built education around industry demand. India and Bangladesh have also experimented with industry-linked training and apprenticeships.
Pakistan does not need to copy any of these models wholesale. It needs to build a system suited to its own economy.
Industry-led skills councils could identify shortages, update curricula and help assess trainees. Existing technical institutes should be modernised and evaluated before new ones are announced. Public funding should increasingly follow outcomes such as completion, employment and earnings.
Paid apprenticeships should be expanded, with targeted public support helping smaller firms that cannot afford to train workers alone. But skills reform will work only if it is accompanied by policies that encourage businesses to invest, expand and hire.
Training people for jobs that do not exist is not a development strategy; nor is creating jobs that Pakistanis are not equipped to perform. The real opportunity lies in connecting the two.
Pakistan’s youth bulge will not become a demographic dividend simply because the country has more young people. It will become one when schools build stronger foundations, employers have a meaningful role in training, young people can see a path from learning to employment, and firms can move into more productive activities.
The reform agenda should therefore stop measuring success by classrooms filled or certificates issued. It should measure what ultimately matters, skills acquired, jobs secured, productivity raised and incomes improved.
Copyright Business Recorder, 2026
The writer is Chief Executive/Secretary-General OICCI
PakistanWorld BankunemploymentjobsyouthpopulationyoungBureau of EmigrationPakistan Economic Survey 2025 26Penang Skills Development Centreskills crisisproductivity standardsproductive work
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