Greater spread of wealth leads to a stable state

As early as March 1776 when his monumental work An Inquiry into the Nature and Causes of the Wealth of Nations was first published, Adam Smith in Book I, Chapter Eight, recognised the importance of ensuring the uplift of the lower classes of labourers and workers. In his writings he poses the question “Is an improvement in the circumstances of the lower ranks of people to be regarded as an advantage, or as an inconvenience to the society?” After first presenting the notion that workmen of different kinds make up the far greater part of every political society, Smith expounds that no society, of which the far greater part of the members are poor and miserable, can surely be flourishing and happy. Smith goes on to state that it is but equity, besides, that those who feed, clothe and lodge the whole body of people (through the products of their labour), should have such share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.

Smith’s understanding finds validation when one considers an example of any “developed state” against Pakistan. Regularly it is seen that workers and labourers performing manual or clerical work in such “developed states” earn sums enabling them far greater purchasing power and quality of life as compared to those performing similar jobs in Pakistan. This greater income in turn allows families from the working classes to provide for better opportunities for their children, resulting in not only uplift of said families from generation to generation but also development and progress of the state as a whole. This greater spread of wealth is inevitably one of the (multiple) factors leading to a more successful and stable state, with its people on average happier and prosperous.

In Pakistan however, it seems things are going in the reverse. It is no secret that as a result of crippling inflation many once low-income households in the country are being pushed below poverty lines, with families finding it hard to manage daily expenses for basic necessities such as food, shelter and clothing. Rather than there being a greater spread of wealth, the divide between the rich and the poor seems to keep increasing. I am no economist and cannot advance words of wisdom as other writers in these columns on how to curtail inflation or reduce the divide between income classes, but being a legal practitioner, my concern is focused towards how workers are routinely exploited by employers with little regard to labour laws or the mischief they seek to protect. Without going into details, there are numerous laws which have been enacted by the National and Provincial assemblies prescribing many rights to workers in Pakistan. Restrictions on minimum wage, requirements for profit participation in certain scenarios, paid leave and the necessity to pay gratuity benefits are just some of the few examples of the benefits that Pakistani labour law guarantees to workers in a bid to ensure fairer distribution of wealth. While these labour laws do prescribe some deal of protection to the labour class, one major failing in their structure is that most of the guarantees are extended only to the “permanent employee”.

Given this limit, it is a regular practice that commercial organisations and, most often, those owned or controlled by federal of provincial governments find creative legal ways to skirt around allowing a worker to fall within the “permanent” category. By doing so, they enable themselves to avoid having to pay or make available to said employees the monetary benefits otherwise guaranteed under the law. One such creative mechanism used in these endeavours is the “contract employee”. Workers are often employed through contractors or “paper” third parties by way of a labour contract, generally renewed on a yearly basis. By such mechanism, the organisation pays the contractor/paper third party, who in turn pays the worker after retaining a service fee. The worker, on paper, is shown as a worker of the contractor whereas in reality the worker is performing roles for the principal organisation, tasks which are routinely performed by regular permanent employees and reporting directly into the hierarchy scheme of the organisations management. The work is continuing in nature and the worker despite contining service for years on end is never made an official employee of the principal organisation, much less a permanent employee. At the end of their tenure, they are sent home without pensionary benefits, gratuity or other insurance plans which may otherwise be available to the permanent employee under law. The organisation ends up paying less by avoiding the benefits and the third party ends up generating a separate service fee. In monetary terms, the organisation wins, the third party wins and the worker loses.

This practice is not something which has gone without challenge. Without naming the organisations involved, such legal constructs have been challenged up to the Supreme Court with decisions falling on both sides of the gamut. On some occasions, the Courts have deprecated these practices, directing the organisations to ensure benefits to their workers and protections/benefits of permanent employees, whereas in recent times a trend has evolved to dismiss such challenges primarily on legal procedural technicalities and jurisdictional restrictions. The next years may be telling on the approach that the Court chooses to finally adopt. However, in the meanwhile, it is worth understanding that these legal constructs are in reality the brainchild of intelligent legal practitioners developing methods to further their clients (the organisations) commercial interests.

While there is no cavil to the notion that as a legal adviser, a duty is owed to act in our client’s best interest, ours is a profession deeply rooted in ethics, morality and equity. We must advise with the spirit, letter and purpose of the law in mind. Rather than being the tool to create mechanisms for exploitation of labour, I would urge that we take it on ourselves to instead be the guide to ensuring that fair practices are adopted and the protections of the law are not subverted through fictitious instruments. When solicited for advice on labour law, remember that the advice we render affects real people with real families. It can shape how our society develops and be used as precedent to justify practices and behaviour otherwise oppressive. It can influence future ways of doing business or norms deemed commercially or morally accepted. Adopting an approach of finding ways to escape the protections guaranteed to labour under labour laws, and only commercially serves the organisations operating purely on capitalistic considerations and nothing more. It ignores one of Smith’s basic notions that spread of wealth to the labour class is not only equitable but a bedrock to ensure a flourishing society. This small change in approach, whereby we allow ourselves to be guided also by notions of ethics and not just commercial consideration is thus only a small example of what we can do to help improve Pakistan towards one day being a prosperous and stable economic state.

Published in The Express Tribune, October 27^th, 2023.

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