Background
Unemployment remains a pressing issue in Afghanistan, with 500,000 jobs lost in the first six months following the Taliban’s takeover. The exclusion of women from the workforce, driven by the Taliban’s restrictive policies, has worsened an already dire economic crisis. This exclusion discouraged economic activity, innovation, and contributed to job losses even for men. Despite these challenges, the Taliban’s Ministry of Economy claimed to have created 300,000 jobs in 2023 through development and humanitarian aid projects, with promises to create an additional 1.5 million jobs over the next five years. This article critically examines whether these claims align with Afghanistan’s economic reality and whether the Taliban can deliver on their promises of large-scale job creation.
1. Labor Force Dynamics
Figure 1: Afghanistan’s Labor Market, 2016-2023
According to the World Bank, Afghanistan's labor force in 2023 was approximately 8.9 million people, with an unemployment rate of 14.4%. The labor market, already under pressure prior to the Taliban's return, saw a significant worsening after their takeover. Unemployment, which stood at 11.7% in 2020, surged in subsequent years. Female unemployment was particularly affected, rising from 17% in 2021 to 29% in 2023, reflecting the impact of Taliban policies on women. Additionally, the labor force population saw a modest decline, dropping by 0.5 million from 2021 due to large-scale migration. (see figure1)
Figure 2: Employment by sector
The sectoral employment distribution in Afghanistan, as shown in figure 2, highlights the country's dependence on agriculture, which accounts for nearly half (46%) of total employment. Sectors like community, social, and personal services (17%), wholesale and retail trade (11%), and construction (10%) provide important but smaller shares of employment. These sectors are likely concentrated in urban areas and highlight a gradual shift toward service-oriented jobs and infrastructure development. Manufacturing (8%) and transport and communication (7%) also play modest roles. The negligible employment in sectors like finance, insurance, and mining (1% each) indicates a significant gap in higher-value industries, limiting Afghanistan’s potential for economic diversification and long-term growth.
2. Economic Context
Technically, the creation of large-scale employment requires substantial economic growth. Okun’s Law highlights the link between GDP growth and employment, with studies indicating that for every 1% increase in GDP, employment grows by approximately 0.3 to 0.38 percentage points. In developing countries, this elasticity can be as high as 0.7%, meaning a 1% GDP growth could result in a 0.7% rise in employment. Thus, to generate 300,000 jobs (about 3.3% of Afghanistan’s labor force), a significant economic expansion of 4-6% would be required, depending on labor productivity and sectoral distribution.
According to the National Statistics and Information Authority (NSIA), Afghanistan's economy expanded by 2.7% in 2023. However, this growth does not indicate significant job creation. Despite the positive figure, Afghanistan's GDP only increased by less than half a billion dollars, reaching $15.7 billion—far below the $20 billion level of 2020—showing limited capacity for meaningful improvements in employment.
Moreover, a closer sectoral analysis reveals structural gaps that cast doubt on the feasibility of sustainable job creation. Even though retail trade contributed 57% of overall GDP growth, the economy has faced deflation, averaging -7.7% in 2023. Typically, deflation signals decreased consumer demand, which would usually result in lower retail activity. The growth in retail trade could likely be driven by essential goods such as the food sector that tend to offer low-wage, temporary jobs. While some components of the service sector such as transportation and hospitality showed slight improvement, other components like real estate and finance experienced negative growth, offering minimal employment opportunities.
Agriculture, which accounted for 26% of total GDP growth, added just $111 million. Given that agriculture employs approximately 46% of Afghanistan’s workforce, this level of growth is inadequate to support substantial job creation. Moreover, the agricultural sector often generates low-wage employment and remains highly vulnerable to external shocks, including adverse weather conditions and global commodity price fluctuations, further highlighting the structural limitations of Afghanistan’s economy.
The industry sector, which includes manufacturing, electricity, and mining, contributed 13% to GDP growth, translating into a modest $55 million. This growth is insufficient to drive significant employment opportunities, especially in labor-intensive sectors. Manufacturing grew by 4.7%, and mining by 6.1%, but their small contribution to overall GDP means that these sectors cannot absorb a significant portion of the labor force. Additionally, construction—a traditionally strong employer—showed a slight decline, suggesting limited prospects for job creation in this sector.
Figure 3: Sectoral Contribution to the GDP Growth, 2023
3. Challenges of Job Creation
Despite the Taliban’s ambitious claim of creating 1.5 million jobs over the next five years, the reality paints a far grimmer picture for Afghanistan's labor market. The current economic stagnation, marked by deflation, severe poverty, and political instability, leaves little room for large-scale job creation. the economy faces numerous significant challenges, including:
- Investment Drought: Both domestic and foreign investments have plummeted due to political uncertainties. Security concerns, sanctions and an unstable political environment, along with a pessimistic economic outlook, deter investors from starting businesses in the country. This lack of capital inflow severely limits economic activities and job creation opportunities.
- Declining Consumer Spending: With the soaring poverty rate, consumer spending—a key driver of economic growth and job creation—has significantly decreased, leading to the current stagnation. This reduction in demand affects businesses across all sectors, hampering their ability to maintain, let alone expand, their workforce. The World Bank reports that 4 out of 5 firms reported a decline in consumer demand in the past six months.
- Limited public Spending: Taliban rule implies a drastic loss of foreign assistance and international financial assistance which was funding many jobs and development projects. The aid flows, totaling 43% of GDP as recently as 2020, have significantly fallen. In the face of this reversal of resource flow, not offset by increased domestic revenues, the Taliban is severely handicapped in its ability to try and stimulate the economy by public spending into job creation on any significant scale.
- Private Sector Challenges: Without a vibrant private sector, large-scale employment creation is nearly impossible. Uncertainties and political instabilities in Afghanistan are costing the private sector heavily. A recent survey by the World Bank suggests that only half the firms are working to full capacity, more than one third work below their capacity, and 8%, notably women-owned, have shut temporarily or permanently due to uncertainties regarding political dynamics and the Taliban's policies.
- NGO Involvement Reduction: Even though the Taliban talks about various projects of the NGOs being implemented and developed in terms of providing jobs, most of the international organizations that used to operate in this development sector have ceased their operations. The humanitarian organizations left in the country have reduced their operations or left the country altogether due to Taliban policies. Some NGOs reported a decrease of 65% in their budget, causing a reduction in staff salaries and the closure of several projects.
- Gender Suppression: The Taliban’s severe restrictions on women’s rights make it nearly impossible for half of the population to find jobs. Women have been laid off from many positions in the civil service, and NGOs and private firms face significant challenges in hiring women. According to new Taliban rules, women cannot share the same room or, in some cases, the same office due to the condition of mahram. Additionally, women fear commuting to work because of the threat of authorities’ reactions if they are found traveling alone. These constraints significantly hinder women’s employment opportunities.
- Brain Drain: According to the International Organization for Migration (IOM), nearly 8 million Afghans have left the country, many of whom are skilled professionals. Following the Taliban takeover, this exodus has created a significant skills gap in the labor market. The departure of educated and experienced individuals has made it challenging to fill specialized positions, which in turn hampers economic growth. The loss of talent affects various sectors, including healthcare, education, and technology, leading to a decline in the quality of services and innovation. This brain drain not only impacts immediate economic stability but also undermines long-term development prospects for the country.
- Financial Sector Instability: The banking sector's instability and limited access to international financial systems have created liquidity issues, making it difficult for businesses to access credit and expand operations. 25% of private firms and 62% of NGOs mentioned liquidity and banking challenges as their top concern.
In summary, Afghanistan’s economic contraction, combined with a lack of growth drivers doesn’t offer a prosperous employment outlook. The modest GDP growth of 2.7% in 2023, coupled with the limited labor absorption capacity in critical sectors like agriculture, industry, and construction, suggests that large-scale job creation is out of reach. As the country continues to face severe economic challenges, it is essential to rely on independently verifiable data from international organizations rather than the unsubstantiated claims of the ruling regime. Without a significant economic overhaul and improvement in governance, the prospects for sustainable job growth remain bleak.
