Pakistan’s Demographic Dividend Faces a New Disruptor: Artificial Intelligence
For years, Pakistan’s investment narrative has leaned heavily on the promise of its demographic dividend — a young, digital-native population that could become both a booming consumer market and a valuable talent pool. While this argument holds promise, its potential is increasingly complicated by long-standing structural issues — and more recently, by the disruptive rise of artificial intelligence (AI).
Demographic Potential vs. Structural Realities
Pakistan’s youthful population is often touted as a national asset, but that optimism is frequently tempered by persistent caveats: a subpar education system, macroeconomic instability, and declining purchasing power. Now, AI enters the equation, introducing both uncertainty and opportunity to this already fragile balance.
Across the globe, the rise of AI has triggered fierce debates about its potential impact on jobs and productivity. On one end of the spectrum are techno-optimists, envisioning a future where machines do it all. On the other are more cautious voices, who question the social costs of automation. A more balanced perspective suggests AI could enhance business efficiency while preserving — or even reshaping — human employment.
Read More: Expert Warns That AI Will Soon Replace Human Programmers
Understanding AI’s Economic Impact
In economic terms, output depends on labour, capital, and total factor productivity (TFP) — the latter often boosted by innovations like AI. However, greater TFP often reduces the need for labour through automation, raising important questions about employment sustainability.
AI is expected to have the greatest impact on the services sector, particularly roles involving data analysis, research, and other knowledge-based tasks. According to the OECD, industries like telecom, media, and IT services are especially exposed to AI across four dimensions: human capital, innovation, exposure, and usage.
Why Pakistan May Seem (Temporarily) Insulated
Pakistan’s labour composition offers some protection — at least on the surface:
- Over one-third of the workforce is in agriculture, forestry, and fishing, which is largely insulated from generative AI.
- The construction sector, employing 9.5% of workers, also faces relatively low automation risk.
- While services employ 37.5% of the workforce, only 12.7% are in high-AI-exposure roles (managers, professionals, and technical staff).
Of that 12.7%, professionals and managers make up over half. These roles are more likely to be augmented by AI rather than replaced — suggesting complementarity rather than redundancy.
The Real Threat: Productivity, Not Just Automation
Though the overall AI exposure may be low, complacency would be a mistake. Pakistan’s long-standing productivity crisis poses a deeper challenge. From 1992 to 2001, GDP per worker in Pakistan grew at an average of just 1% annually, lagging behind South Asia and other lower-middle-income countries.
This underlying weakness raises concerns even in sectors that seem AI-resilient. Our labour force is not just under-skilled for the future — it’s underperforming in the present.
Hidden Risk Zones: IT and Business Services
While broad labour statistics may downplay risk, certain sectors are especially vulnerable. IT and business process outsourcing (BPO) — key exporters and forex earners — employ close to one million people. These sectors are heavily reliant on labour arbitrage, offering low-cost services to foreign markets.
But with generative AI capable of performing many of these tasks faster and cheaper, these sectors face an existential challenge. Without upskilling or moving up the value chain, human workers may struggle to compete with machines.
Looking Ahead: A Dual Approach Needed
Pakistan faces a complex AI future. While the country may be less exposed to AI-induced job losses due to its current employment structure, this may only reflect its technological lag rather than resilience. The challenge is twofold:
- Upskilling the workforce to match the demands of an evolving digital and AI-driven economy.
- Boosting productivity, particularly in low-value sectors, to compete globally — not just against other cheap labour markets, but increasingly, against machines.
Without urgent reforms in education, training, and digital infrastructure, the country risks squandering its demographic advantage — not because of AI’s arrival, but because of its own inaction.
Author:
The writer is the co-founder of Data Darbar and a faculty member at the Karachi School of Business and Leadership (KSBL).
