COVID-19 has sparked extensive debates on work and employment. Worldwide unemployment estimates, the plight of small businesses, and the mass movement of migrant workers have received attention. Similarly, working parents’ triple shifts juggling homeschooling with productive and reproductive work, and the extension of the workday to all odd hours as employees ‘work from home’ has underscored the unsustainability of lockdown measures. How do these debates relate to the ground realities in Pakistan?
Around 78 per cent of non-agricultural employment in Pakistan is informal. Regardless of the place of work, such employment is vulnerable and precarious. Even in the formal sector, greater casualisation of the workforce, especially in manufacturing, is seeing employment on casual contracts offering little to no worker benefits. On the firms’ side, primary concerns include an uncertain macro environment, energy-related issues, and incomplete capital and financial markets. Here, SMEs bear mentioning. SMEs contribute 40pc to GDP, and constitute nearly 90pc all businesses in the country. Yet, they are undercapitalised, scaled too small to be efficient, and remain locked out of formal credit and financial markets.
The first priority remains health investments.
Thus, both the demand and supply sides of Pakistan’s labour market, whether considered in isolation or in connection with complementary markets, remain underdeveloped. Poor labour law enforcement, a political economy of institutional capture, an increasingly competitive global and domestic arena combined with poor skill development and educational achievement keep wages low. This, along with other factors, has manifested as an average annual income level of about $1,300 and a poverty rate of 24pc. Against this backdrop, a nationwide lockdown has had dire implications for workers and especially small businesses.
First estimates on unemployment due to Covid-19 put it at around three million with a worst-case scenario of up to 18.5m. Similarly, estimates during the first few weeks of lockdown on a sample of micro-entrepreneurs show household income and sales falling by nearly 90pc. These unemployment effects and business losses are expected to persist well into the next year with sectors such as the service industry and SMEs taking a major hit.
School closures have also burdened parents. For those families who have moved learning and work online, parents are homeschooling while also attending to other responsibilities. In this, the ‘double double’ burden of taking care of the sick while tending to house and labour-market duties falls disproportionately on women. Yet, estimates by the Pakistan Institute of Development Economics indicate that only about 19pc of the officially classified workforce has the capacity to work remotely. This has likely resulted in major layoffs, especially in the informal sector, pushing households into poverty. Besides, Covid-19 means health shocks that often force vulnerable families into poverty even when income streams remain intact.
To counter these effects, the government has taken two major steps. The first is the launch of the Ehsaas Emergency Cash programme and the disbursement of transfers to the poor. Here, a major concern is those households that are ineligible for transfers but remain food insecure. The second is a reopening of the economy. This is seeing escalating Covid-19 cases putting increasing pressure on our overburdened health system.
Moving forward, the first priority remains health investments. We need to address shortages directly related to the pandemic, while also increasing overall investments in the public health sector. Although public health expenditures have been growing, we dedicate less than 1pc of GDP to health, see wide disparities in health disbursements between urban and rural Pakistan, and have less than one health professional and only 0.6 hospital beds per 1,000 patients. Similarly, we need to ensure secure decent livelihoods for our population. Here, we must leverage the growing 3G/4G networks to allow more people to work remotely while tapping into online service and education.
To achieve these goals, it is argued that growth is the key. Of course, with a major slowdown for the foreseeable future, this is a significant challenge. However, generating sufficient income is only part of the answer. It is the nature of the growth — who it benefits and how — that matters. Clearly, regardless of the pandemic, we must take a closer look at how our economy is organised. How do we integrate the informal sector without compromising its benefits? How do we improve earning capacities and guarantee basic incomes? How do we counter the quantity-quality trade-off in education? These are just some of the questions that the pandemic has highlighted. We must urgently answer these if we are to successfully come out of this stronger in the long run.
The writer is assistant professor of economics at Lums.
Published in Dawn, June 20th, 2020