Due to COVID-19, the world’s GDP will slide by -1pc in 2020. The unemployment rate will increase approximately two-folds. This menace of COVID-19 also continues to wreak havoc in developing economies like Pakistan.
Pakistan is also amongst economies effected from COVID-19. The GDP growth rate of Pakistan fell from 3.3pc to -1.5pc. A recent survey by Gallup Pakistan reveals that more than seventeen million people may become unemployed in the future amid the COVID-19 crisis and the unemployment rate might hit 28pc.
COVID-19 increased unemployment rates
Pakistan is already facing the challenge of a high unemployment rate, especially amongst the young population. According to the labor force survey, there is a high unemployment rate of 43.73pc in the age group from 20 to 29 years old.
Similarly, a recent report of the United Nations Population Fund postulated that 127.5 million individuals in Pakistan are under 24 years old, giving rise to the so-called “youth bulge”. The youth bulge is the result of decreasing infant mortality along with a high fertility rate. Consequently, a large segment of the population includes children and young adults.
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The youth bulge can reap demographic dividends in an economy if handled properly. However, it may cause a youth bomb as well in case young people cannot find any space for livelihood and substantial employment. Consequently, the youth bomb might create social unrest and political instability.
The study published in current epidemiology reports found that “the long-term unemployed have at least twice the rate of depression and anxiety, as well as higher rates of heart attacks and strokes”.
Therefore, minimal livelihood is essential to prevent the adverse effect of unemployment at the societal and regional level. But due to COVID-19 the adverse effects of unemployment may persist if a large segment of the young population remains non-productive. New employment opportunities during COVID-19 might reduce this adverse effect.
The gig economy as a lever of growth
In generating employment during Covid-19, to some extent, the gig economy can play a significant role. The gig economy is a system where companies rely on independent contractors and freelancers, rather than on permanent staff. The concept is gaining traction in Pakistan as well.
The fact can be observed from the report by Payoneer, which postulates that Pakistan’s digital gig economy growth is fastest in Asia and fourth fastest in the world with a growth of 47pc in 2019.
When the pandemic peaked in Pakistan the lockdown policy allowed only grocery, pharmacy, and takeaway restaurants to continue operations. This gave rise to the demand for gig workers. In this situation, the role of delivery apps needs to be lauded because they started employing gig workers and provided employment to the unemployed.
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In the gig economy, the demand for labor is perfectly elastic with the rejection rate is extremely nominal. Anyone with basic knowledge on internet usage can join it and get a livelihood in the presence of no job or during the transition period from one job to another job.
Now, the question is how exactly does the gig economy generate employment. Let’s take the example Foodpanda’s new service named ghar ka khana (home-cooked meals) which was introduced during Covid-19. It generated more than 1000 vacancies for home chefs over 18 cities across Pakistan in the pilot phase. A home chef can make more than Rs 50,000 per month through this service while increasing the demand for delivery riders.
Challenges of the gig economy
In the gig economy, to explore the further potential gain, short-run reforms are required in the light of the findings of NPS (Net Promoter Score) study for E-commerce by Priceoye. The report postulated that NPS for food delivery is -10, which states that customers are more likely to turn away for food delivery and what’s even worse is that they may discourage potential customers from choosing food delivery.
However, a deficiency might provide room for a counter-efficiency that in turn realises the potential gain. The deficiency can be softened by making apps user-friendly, reducing delivery time, enhancing consumer confidence, and ensuring the charging of the listed price.
Read more: Covid-19: Pakistani economy can thrive if managed well
Moreover, product range and product quality are also associated with the growth of the gig economy. On the flip side, the growth of the gig economy can generate further employment opportunities among the youth.
The author is a lecturer at Minhaj University, Lahore, Pakistan and holds a Ph.D in Economics from the University of the Punjab. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.