Informal sector grows by 20pc

By Ihtashamul Haque
ISLAMABAD, Sept 1: Pakistan’s informal sector has grown at an unprecedented pace over the years and today 72.9 per cent of the non agriculture workforce is employed by this sector.Informed sources told Dawn on Saturday that there has been 20 per cent plus growth in the informal sector and the issue has become a matter of great concern, with government considering a proposal to bring the informal sector in the mainstream through its “decent work country programme”.According to a conservative estimate, out of $160 billion size of country’s economy, $32 billion plus is in the informal sector, providing a huge opportunity to its businessmen to evade taxes every year.According to the latest details 32 per cent workforce is in the wholesale and retail business, 21 per cent in the manufacturing sector, 17.5 per cent in community and social and personnel sector, 13.8 per cent in construction and 11.1 per cent in the transport sector. This included both in urban and rural areas.The informal sector consists of small units producing goods or services with the primary objective of generating employment and incomes to the families engaged in these activities. Informal activities have often been characterised by low levels of capital, skills, access to organised markets and technologies; low and unstable incomes and poor and unpredictable working conditions. Such activities are often outside the scope and purview of the official statistical enumeration and government regulations as well as are beyond formal system of social protection.The units operating in the informal sector are highly labour intensive but employment is mostly casual; based on kinship, personal relations rather than contractual arrangements ensuring protection. The informal sector activities depend, to a large extent, on the local and regional demand.The focus should be on productive and decent employment creation rather than low productivity and marginalised jobs that largely create a pool of working poor.The informal sector, the official said, plays a significant role in employment and income generation in Pakistan but is marked with extreme inadequacy of detailed and reliable data.According to latest official data, more than three fourths of the employees’ monthly income is even less than Rs1,500. More than quarter of males and two thirds of females have monthly income of less than Rs2,500.The regional analysis shows that a higher proportion of females earn less than minimum wage in both urban and rural areas as compared to males.Pakistan, he said, needs skilled labour which should be accounted for in the formal sector properly. The access to high quality goods at lower prices due to globalisation has brought changes in the structures of production.The easier growth options are no more available and penetration in the global market is critically linked with the skills andcapabilities of the workforce. Meeting the challenges require retaining technical and vocational competence as well as productivity of the workforce through better education, training and retaining.In the past the focus was largely on the demand augmentation rather than addressing this supply side issues.Resultantly, the vast treasure of the nation is mostly untrained and not ready to take the high value added production. And this unskilled labour is mostly employed by the informal sector whose employers also offer fewer wages to their employees.A large proportion of the current labour force does not possess skills measurable in higher education terms. Literacy level is as low as 52 per cent. The educational distribution of literates shows that 35 per cent are below matric, 10 per cent are matriculates and 4.1 per cent have higher secondary certificates. The degree holders account for only a small (3.8 per cent) proportion.