Regularising the informal sector

As in many other developing countries, the bulk of Pakistan’s workforce is still dependent on the so-called informal sector for its livelihood. The informal sector undoubtedly plays a significant role in our economy. It absorbs a vast proportion of workers who may otherwise be unemployed. It also provides services at a cheaper cost to the public and produces goods and services that complement the formal sector. However, this is only one side of the story. The informal sector is also unregulated and untaxed. Much of the profits accrued within the informal sector, therefore, go into the pockets of the few, who are free to exploit poorer workers with no fear of labour inspections, no need to provide legal contracts of employment or to ensure minimum wage guarantees.

Our government pays lip service to the need to regularise the informal labour force but doing so in effect remains a tall order. Regularisation of informal sector workers would imply providing a range of benefits to multitudes of landless farm workers and rural and urban based domestic workers.

Our informal sector workers are currently not only being underpaid, they are working without regard to workplace safety, health insurance or benefits and access to social security benefits. Formalisation of this sizeable informal economy would also require the government to address the rampant problem of child labour.

Besides agriculture, informal sector workers in rural and urban areas across the country work as domestic servants, produce glass bangles, footwear, embroidery, garments, handicrafts, sports goods and surgical instruments, and work in fisheries, mining and leather tanneries.

The owners of informal factories and sweatshops, and the employers of other types of home-based workers, have little incentive to regularise their production facilities. The government itself is still struggling to ensure decent working conditions to the minority of workers who are employed in the formal sector. Thus, the onus of bringing about a change in circumstances confronting the informal sector falls on workers themselves.

Earlier this year, after years of hectic efforts, the Home-Based Women Workers Federation managed to achieve a major landmark of securing legal recognition for an estimated five million home-based workers across Sindh. These workers, mostly women and girls, work long hours from their homes on a piecemeal contract basis. While this legal recognition may not bring about an instantaneous improvement in the lives of poor home-based working families, but it now provides them the ability to legally demand minimum wages and to also apply for registration in government-operated worker welfare schemes, such as those meant to provide retirement benefits.

However, expecting exploited workers themselves to become better organised and improve their working terms and conditions is not quite fair. It is imperative that specialised agencies, such as the International Labour Organisaiton (ILO) encourage countries like Pakistan to ratify the Homework Convention. The ILO also needs to work more closely with our provincial governments to not only put in place necessary legislative safeguards for informal workers, but also effectively implement them. Otherwise, the legal recognition in Sindh will not produce any significant results.

Other major development agencies, such as the World Bank and other bilateral donors, must also pay more attention to regularising the informal sector in countries like Pakistan. So far, globalisation, liberalisation and increasing global production capacity has not automatically led to improving working conditions. Therefore, international development agencies must also do more to dissuade multinational corporations from taking advantage of labour exploitation in poorer countries through increasingly flexible supply chains to accrue larger profits. Unless these broader efforts are simultaneously implemented, developing countries will continue in trying to outdo each other by suppressing the rights of their own marginalised workers, in the bid to lure in foreign direct investment.

Published in The Express Tribune, April 28^th, 2017.

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