LAHORE: Aging populations in developed countries are disrupting the global economy, with a shrinking, unqualified workforce stalling growth. While most nations with a youth bulge — except Pakistan — are addressing this gap, the situation remains challenging for the global economy.
Urbanisation in developing countries like Pakistan also poses challenges. As people migrate to cities seeking better employment opportunities, urban infrastructure and services are stretched thin, often leading to housing shortages, overcrowded public transport, and insufficient healthcare and education facilities. The movement of people to urban areas exacerbates the economic divide, as rural regions lose human capital and informal employment rises, often characterised by low productivity and poor working conditions. Rapid urbanisation, if poorly managed, can lead to environmental degradation, hampering long-term growth.
The global imbalance between an excess workforce in developing countries and labour shortages in aging economies impacts global growth in complex ways. Developed economies facing labour shortages, especially in the healthcare, construction and technology sectors, struggle to sustain growth and often face inflationary pressures due to rising wages. Conversely, countries with large youth populations, like Pakistan, face underemployment and brain drain, leading to social challenges. Managed migration could help bridge this gap, enhancing productivity in aging economies while remittances drive consumption and investment in developing nations. However, restrictive immigration policies and skill mismatches limit this potential.
Pakistan’s growing population, particularly its young workforce, offers a unique opportunity compared to the demographic deficits elsewhere. To turn this into an asset, Pakistan must focus on education, skills development, and creating high-quality jobs to avoid its demographic advantage becoming a liability. Reforms in education and training programs are essential to align skills with market demand, particularly in high-demand sectors like IT, healthcare and engineering.
Despite its strategic location, Pakistan remains under-integrated into global trade, mainly due to political tensions, poor infrastructure, and complex trade policies. Improving diplomatic relations, enhancing cross-border infrastructure, and aligning trade policies with regional standards could position Pakistan as a trade hub. By expanding trade beyond China to other South Asian and Middle Eastern countries, Pakistan could build a more resilient and diversified trade profile.
Countries with aging populations, like Japan, many European nations, and increasingly China, face a shrinking workforce and rising healthcare and pension costs. This demographic shift slows economic growth, strains public finances, and increases demand for healthcare services, requiring more funds to sustain social security systems. The decreased labor supply in aging economies drives up wages and labour costs, reducing competitiveness. In response, many companies are automating and outsourcing, further shifting global supply chains and potentially reducing job opportunities for low-skilled workers worldwide.
Pakistan can harness the potential of its large, young workforce by investing in innovation, improving vocational training, and supporting industries that can absorb young talent, such as IT, manufacturing, and services. Policies should foster entrepreneurship and small business development, boosting employment and economic dynamism. Creating a supportive environment for digital and tech industries could also position Pakistan as an exporter of services, a sector growing in significance as more businesses shift online. Pakistan’s strategic focus should be on transforming its youth bulge into a skilled, employable workforce while integrating itself into global trade and financial systems. This approach will enable Pakistan to capitalise on its demographic dividend and lay the foundation for sustainable, inclusive growth.
