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Rapid growth in self-employment

July 23, 2012


WHILE big companies are shedding labour, they, along with information technology, are creating space for rapid growth of self-employment.

Over three years ending fiscal 2011, self-employment has shot up by 6.6 per cent to nearly 40 per cent of Pakistan’s employed labour force.

Flexible labour policy being pursued by corporates around the world has ended lifetime careers, traditionally offered by them to their employees. Now professionals as well as low skilled persons have to pursue their lifetime careers by changing jobs or through self-employment. Many quit jobs to float their businesses or consultancies.

According to the Pakistan Economic Survey 2011-12 , the pace of growth in employee category, up from 35.8 in 2008-09 to 36 per cent of 2010-11, was much slower than the rise in self-employed category from 33.3 per cent to 39.9 per cent of the total employed work force of 53.84 million in 2010-11 During this period many industries, however, had to lay off workers because severe energy shortage.

Officials say that information technology, skill development and micro-credit etc have spurred self-employment. There is also a trend among public corporations to outsource jobs as many of them are trying to focus on their core business in a difficult business environment worldwide. The wage- labour system is giving way to a wide range and variety of contracts ranging from consultancy to piece jobs. With the advent of the information technology , companies rely ‘more on independent contractors and freelance work.’

Companies, trying to become lean, thin and agile, are increasingly showing preference to hiring talents for specific jobs rather than keeping professionals on their permanent staff. In the United States, a survey has indicated that 58 per cent of the companies intend to hire professionals for specific assignments.

In the US, there is huge reservoir of ‘talents on demand’. Networking in value chains has been made easier by information technology obviating the need for production and distribution under a single umbrella. And IT helps even the self-employed to access global markets.

As it is, nearly 74 per cent of the total labour force in Pakistan is employed in the informal sector. In the period of three years covered by the Economic Survey 2012, the formal sector did not show any significant changes in the employment level. In fact in urban areas, there was ‘significant reduction’ in the ratio of employment while joblessness has come down in rural areas because of enhanced support price for wheat in recent years.

About 45 per cent of the total employed are engaged in agriculture, forestry, hunting and fishing. In recent years, agriculture has moved nearer to the centre of country’s development strategy for reasons for food security and growing international demand for foodstuff with the countryside providing raw materials for industry and market for manufactured goods.

The corporate–led growth does not produce enough jobs particularly because of its focus on high-tech which needs skilled people. It is squeezing the pace for the low/non -skilled persons while the public corporations listed on stock exchanges are shrinking in numbers worldwide. In Pakistan these listed firms constitute less than one per cent of the total number of private companies, partnerships etc. The numbers are also being reduced because of acquisition and mergers of companies unable to face fierce global competition and in the process getting too big in many cases to manage efficiently.

The Anglo-Saxon model is in the doldrums and international financial system is contracting fast because of it. Global investors are generally sitting on the sidelines waiting for the financial storm to be over. The unending financial crisis has created room for new economic agents to fill the space vacated by it. And economic activity is getting impetus from self-employed entrepreneurs who produce goods and services cheaper than the big corporations, particularly in any economy under severe stress.