Unemployment, Unskilled Workers, Wage Inequality, and Per Capita Income: An Analysis of Service Sector in Pakistan

The purpose of this study is to investigate in the relationship between wage inequality, unskilled workers, inflation, foreign direct investment and low per capita income of workers in services sector. The author utilized time series secondary data of 20 years to examine empirical relationship between dependent variable, per capita income, and independent variables such as foreign direct investment (FDI), inflation, unemployment, population growth and wages. Different statistical tools such as ADF Test, Correlation matrix, ARDL Model, Error Correction Model, Granger causality and Ramsey Reset test were employed to analyze these relationships. The empirical findings reveal that FDI has positive association with dependent variable, per capita income, while population growth unemployment and wages have negative relationship with it. The study suggests that the Government of Pakistan should boost FDI, control population growth, inflation, wage rate and reduces unemployment to improve per capita income of workers in service sector.