Employment trends highlighted by the recently published Economic Survey do not bode well for the governments new mantra of documentation and broadening of the tax net.
Even though the countrys employment rate is propped up, thanks to accounting for the 29 percent of the total working population employed as unpaid family workers, anecdotal evidence suggests the number of jobless Pakistanis is still on the rise.
Improvements in the crude participation rate (currently active population as a percentage of total population) are mainly attributable to rising employment of women and in the rural areas. The survey admits that both these segments represent mostly low-skill, low-wage jobs.
Moreover, not only informal sector employment is higher than that in the formal sector; job growth in the undocumented sectors is also outpacing the same in documented sectors.
In fact, outside the agricultural sector, 73 percent of all workers employed in the country are working in the informal sector. In rural areas this proportion is about 76 percent, while in urban areas the same stands at about 71 percent.
If the governments pretty picture of the rural populations happily tilling their lands without a moment or hand to spare depicts reality, then what explains Pakistanis rapid move to the cities? A recent ADB study pointed out that urbanisation rates in Pakistan are highest among all South Asian peers.
In the absence of a strong educational and vocational training system in the country, jobs for "legislators/ senior officials and managers; technicians and associate professional and plant/machinery operators and assemblers seem to be losing steam".
Skilled workers appear to be a dying breed as are opportunities of employment for them as the manufacturing sector has registered a marginal employment growth to 13.9 percent of total jobs in 2009-10, from 13 percent in 2008-09.
At the same time, the share of jobs in wholesale and retail sectors has leaped from 16.5 percent in FY09 to 20.2 percent in FY10. Given the lack of documentation in these sectors, a majority of those earning their livelihoods through trading activities remain beyond the reach of the FBR.
Growth in the countrys labour force between 2000 and 2010 stood around 3.7 percent, towering over regional peers, according to UNs report Economic and Social Commission for Asia and the Pacific (ESCAP). A recent ESCAP report on the region also highlights GDP growth in the 1999-2010 period to have been dismal at 4.7 percent. It is little wonder then that about 29 percent of the population is still living on under $1.25 per day.
"Every percentage increase in labour force requires a growth of 2 percent in GDP to accommodate new entrants in the job force," former finance minister Sartaj Aziz told BR Research.
So, on the one hand the country is faced with the challenge of significantly raising GDP growth to provide jobs for the ever-increasing multitude of workers entering the job force. On the other hand, there is a dire need to create new jobs in documented sectors with some level of skill development to push up wage rates and contributions to tax revenues.
Short of that, the dismal proportion of tax payers to the total population will likely persist while low wages will keep aggregate demand low, further perpetuating low economic growth.
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