No bailout for the poor

Published March 29, 2021
Job creation in an underperforming economy is not just a social issue.
Job creation in an underperforming economy is not just a social issue.

The situation is tough. The third wave of Covid-19 is threatening. Ensuring sufficient supply and efficient administration of vaccines is hard. The revival of the International Monetary Fund (IMF) programme provided some measure of comfort to the planners. To appease constituents, however, the PTI government needs to do more. Innovative ideas and alternative channels can be deployed to deal with high levels of joblessness and rising living costs.

The corporate relief package has revived the formal economy but the recovery appears to be jobless. The containment of food inflation seems to be on the government’s agenda. The ruling party, however, does not seem to pay attention to Covid-19–induced unemployment. It probably assumed the measures targeting the revival of the economy would address the issue. Perhaps the job-creating potential of the corporate sector in Pakistan is limited. Besides, the big business wary of labour issues prefers to be leaner and inclined to opt for contractual workers for non-core operations to meander around labour laws.

The corporate relief package has revived the formal economy, but the recovery appears to be jobless

For job creation, therefore, the government will need to extend support to establishments operating under the radar. To cater to the needs of a sector that by definition is unrecorded can’t be straight forward. It will require rigorous planning and execution.

Job creation in an underperforming economy is not just a social issue. It is a matter of cropping the opportunity cost of idle resources in men and material. After all, services offered by the informal sector have a market and are critical to citizens’ needs (house help, plumbers, electricians, groomers, tailors, tutors, caterers, runners, car cleaners and technicians, veggie and fruit vendors, etc).

“If the government can provide an amnesty to builders and developers in the construction sector to achieve a greater goal of wealth creation, it can find ways to reach out to informal businesses for job creation,” commented an economist while discussing the collapse of the parallel economy in the wake of the pandemic.

Dr Hafiz A Pasha, former finance minister and a leading economist, shared strong views on the subject that he said pained him. “It is sad to watch this level of suffering. The income of working families is falling and the cost of living is rising, making life miserable for so many. The government can’t be absolved of the responsibility. Why did it not support the collapsing small businesses when it went out of the way to help the corporate sector? There is no defence for neglecting a sector that engages more than half of the workforce.”

He made a case for extending a Rs500-600 billion micro-credit line to fix the broken financial cycle of small businesses through credible institutions such as Kashf Foundation.

Dr Nadeem Javed, former chief economist of the Planning Commission, concurred with Dr Pasha. “When 68pc of the workforce of the informal sector is in distress, the whole society is affected. In smaller towns, one can spot a new crop of beggars on streets. By closing eyes, problems will not disappear. To avoid grave ramifications later, the ruling party must act now and extend support to tiny firms that need it the most.”

A recent article on the informal sector on the World Bank Blogs website mentions, “More than 80pc of all South Asia’s workers engage in informal activities, and more than 90pc of the region’s businesses are informal. Even in many formal firms, a large proportion of employment consists of informal workers. In Bangladesh and Pakistan, informal workers are the majority within formal firms”.

Discussing the impact of Covid-19, it states: “For Bangladesh, India and Pakistan, the poorest third of the population relying on the informal economy lost 9, 13, and 16pc of their incomes, respectively.” The writers advised the policymakers to consider providing relief to distressed firms through alternative channels, such as microfinance institutions.

A conversation with affected people revealed the gravity of the crisis. Ghaffar, who is an electrician living in Shireen Jinnah Colony in District South of Karachi and works in DHA, was forthcoming while discussing the woes of his social class. He came to Karachi from Vehari, Punjab, back in 2002 as a boy. Initially, he was hired as a house help. Then he became a cook and finally a driver. When his brother trained as an electrician, he started assisting him on holidays. He soon left his job and started working as an electrician first in a shop and then independently.

Hard work and good reputation ensured steady income, but since last year, the pressure of catering to the very basic needs of his family has been crippling, he says. “I somehow make do though my monthly earning Rs18,000-20,000 is barely half of what it was before the lockdown.” Explaining the reason for a drop in income, he said, “The commercial area is slow and many restaurants where I served on retainer closed down or are working on leaner employee strength.”

“In my locality today, every other person is unemployed. My relative, a driver for the past 20 years, is jobless for the last six months. Two of his three married daughters got divorced and returned home with their children this past year. I don’t even want to imagine what it must be like for him.”

Nadir, a tailor master, had to close down his shop at Gizri as the rent of the place piled up. He had to auction his sewing machines to clear his liabilities. Months of struggle for bare survival has weakened Nadir’s resolve to earn an honest living. He said he is unsure if he can turn down a work offer on moral grounds any longer. “It would have been easier had we all contracted Covid-19 and died,” he said in utter despair while talking to Dawn in his tiny shack of a house in Qayumabad.

“With the help of the establishment, the government might be able to manage the opposition, but dealing with public disenchantment will be harder. Had it been possible to sustain a government without public support, powerful dictators in the past wouldn’t leave,” commented a political economist.

The relevant ministers and secretaries were approached, but they did not respond to calls and messages.

Published in Dawn, The Business and Finance Weekly, March 29th, 2021

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