Pakistan’s Demographic Gamble: Youth Power or Middle-Income Trap?
Dr Majid Ali Economic Expert, PMAS-AAUR
In 1950, Pakistan’s first Prime Minister, Liaquat Ali Khan, famously declared that the nation’s strength lay in its people, envisioning an economy propelled by human talent and ambition. Seven decades later, Pakistan stands at a pivotal crossroads: the promise of a youthful population meets the stark reality of a middle-income trap, where modest GDP growth struggles to create meaningful opportunities for its next generation.
Today, nearly 60% of Pakistan’s 240 million citizens are under 30, representing one of the largest concentrations of young people globally. Economists and policymakers warn that this demographic profile could become either a catalyst for economic transformation or a source of social and political instability. “Job creation is the North Star of Pakistan’s economic agenda,” asserts World Bank President Ajay Banga, underscoring the urgency of translating demographic potential into tangible growth.
The statistics are striking. Youth unemployment exceeds 12% nationally and rises to 15% in urban centers. Approximately 40% of graduates are underemployed, often working in informal or low-skill jobs. Public investment in education remains at just over 2% of GDP, far below the levels needed to equip youth with skills for high-value sectors. Female workforce participation, at 24%, further limits productivity and innovation. Pakistan’s export base remains heavily reliant on textiles, which account for more than 60% of foreign earnings, leaving few avenues for upward economic mobility.
The consequences are both economic and social. Surveys reveal growing anxiety, depression, and frustration among young Pakistanis, particularly in cities. Dr. Tahir Andrabi of Dartmouth College observes, “Pakistan has the raw human capital potential to drive growth, but without structural transformation, the youth bulge becomes a burden rather than a dividend.” If unaddressed, these dynamics risk triggering not just economic stagnation, but political unrest and a brain drain as skilled youth seek opportunities abroad.
Lessons from abroad offer actionable insights. South Korea, once a low-income country, invested heavily in STEM education and technical training in the 1980s, producing a workforce capable of powering high-value manufacturing and exports. Malaysia established vocational partnerships and specialized economic zones that directly linked young workers to industry demand, while Vietnam absorbed millions of young workers into manufacturing and services through trade integration and foreign direct investment, achieving sustained GDP growth above 6% annually. These examples illustrate a crucial principle: demographic dividends are unlocked only when education, industrial policy, and governance converge strategically.
For Pakistan, the path forward demands a comprehensive and measurable strategy to ensure sustainable growth and youth employment. Key policy targets could include increasing vocational and technical training enrollment to 500,000 youth annually by 2030, with 50% of the training focused on digital, STEM, and renewable energy skills. Industrial diversification is another crucial objective, aiming to expand high-value sectors beyond textiles, generating at least 2 million new jobs in manufacturing and technology services by 2030. Additionally, fostering the development of a digital economy is essential, with the establishment of 10 technology hubs across the nation, providing incubators to support 5,000 startups over the next decade and creating significant employment opportunities for urban and semi-urban youth. A critical aspect of the strategy is promoting female inclusion, aiming to raise female workforce participation from 24% to 35% by 2030, which could increase GDP by 2–3% and greatly expand the talent pool. Lastly, the continuity of policy is paramount; embedding youth employment targets into a long-term national economic plan, insulated from short-term political cycles, will ensure sustained progress with measurable quarterly and annual outcomes.
Economic modeling suggests that if Pakistan successfully implements these policies, youth employment could rise by 20% within five years, GDP growth could increase to 5–6% annually, and the country could move decisively out of the middle-income trap by 2035. Failure to act, conversely, risks leaving millions of young citizens underutilized, exacerbating social frustration and constraining economic potential.
The stakes are high. Pakistan’s youth represent both its greatest opportunity and its most pressing challenge. Lessons from East Asia demonstrate that transformative change is possible — but only if governance, industrial policy, and education are aligned with the realities of a young and ambitious population. Millions of young lives hang in the balance. The next generation may well define Pakistan’s destiny, and the question is stark: will Pakistan empower its youth, or leave them trapped in economic stagnation?
