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Pakistan : Employment, Output and Productivity ISSUES IN DEVELOPMENT Discussion Paper 33 PAKISTAN: Employment, Output and Productivity Nomaan Majid International Labour Office Geneva Copyright © International Labour Organization 2000 ISBN 92-2-111977-7 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights or reproduction, or translation, application should be made to the ILO Publications Bureau (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland. The International Labour Office welcomes such applications. Libraries, institutions and other users registered in the United Kingdom with the Copyright Licensing Agency, 90 Tottenham Court road, London W1P 9HE (Fax:+44 171 436 3986), in the United States with the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923 (Fax:+ 1 508 750 4470), or in other countries with associated Reproduction Rights Organizations, may make photocopies in accordance with the licences issued to them for this purpose. The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address. TABLE OF CONTENTS ACKNOWLEDGEMENTS ...................................................... vii PREFACE .................................................................. viii INTRODUCTION .............................................................. 1 A. Recent changes in the macro environment ................................ 1 B. The argument ..................................................... 1 CHAPTER ONE - Labour Force and Employment ..................................... 7 1. The data ........................................................ 7 2. Growth of population and labour force .................................. 8 3. Labour force and employment ........................................ 9 Definitions of labour utilization ................................. 9 The self-employed amongst the employed ......................... 10 Underemployment .......................................... 10 Unemployment ............................................ 11 Employment and labour force: An overview ....................... 12 4. Changing trends in the rural-urban distribution of labour force ............... 12 5. Why are labour force participation rates (LFPRs) low? ..................... 13 Education and the labour force ................................. 14 Emigration and the labour force ................................ 14 Gender and the labour force ................................... 14 6. On the changing abilities of the labour force ............................ 15 Labour force expectations and the structure of the job market .......... 16 7. Upshot ......................................................... 16 Data ..................................................... 16 Participation Rates .......................................... 17 Training and skills .......................................... 17 Implications for a strategy .................................... 17 CHAPTER TWO - Output Employment and Productivity: Lessons for an Employment Strategy .. 18 1. A dual focus ..................................................... 18 2. Examining shares of employment and output ............................. 18 3. Sectoral shares of employment and output ............................... 19 4. Growth of employment and output .................................... 19 5. Sectoral employment absorption ...................................... 20 6. Decomposing output growth ......................................... 22 7. Wages and poverty ................................................ 22 Real Wages ............................................... 23 Poverty Trends ............................................. 24 Poverty, Wages and Growth ................................... 25 8. Elasticity, employment, labour productivity and output: An integrated view ..... 26 9. Employment and output growth linkages ................................ 28 10. The agenda for an employment strategy ................................. 29 CHAPTER THREE - The Agricultural Sector ....................................... 31 1. Introduction ..................................................... 31 2. The special nature of employment and output in agriculture .................. 31 iii Measurement of employment .................................. 31 The special nature of output ................................... 31 A combined effect .......................................... 32 3. Output and employment growth rates in Pakistan’s agriculture .............. 33 4. Agricultural employment and total employment ........................... 34 5. Decomposing the sources of output growth .............................. 34 6. Unemployment and underemployment ................................. 35 7. Labour demand ................................................... 36 Cropping patterns and profitability .............................. 36 Size and productivity: Increasing family labour use .................. 37 Mechanization: Reducing labour requirements ..................... 37 Tenurial shifts: Creating an available labour pool ................... 37 8. Wages and poverty ................................................ 37 9. Upshot ......................................................... 38 CHAPTER FOUR - The Manufacturing Sector ....................................... 40 1. Introduction ..................................................... 40 2. Elasticity, employment and output growth ............................... 40 3. Decomposing output growth in the manufacturing sector .................... 41 4. Output and employment in the manufacturing sector ....................... 42 5. The large-scale sector: Main features .................................. 44 6. An examination of productivity in the large-scale manufacturing sector ......... 45 7. The structure of large-scale manufacturing in the 1980s and 1990s ............ 46 The high-growth 1980s ...................................... 47 The 1990s: A period of low growth .............................. 49 8. Towards a policy outline ............................................ 50 Criteria of sectoral choices in an employment-friendly investment plan ... 51 Fiscal expansion and demand .................................. 51 The budget deficit and working capital ........................... 51 Promotion of sub-sectors through tariff rationalizations ............... 51 Capital pricing and directing new investment ....................... 51 The co-ordination of capital flows .............................. 52 The revival of sick industries .................................. 52 Tax policy and flow of goods .................................. 52 Energy pricing ............................................. 52 9. Upshot ......................................................... 52 CHAPTER FIVE - The Small-Scale Enterprise Sector .................................. 54 1. Information and data ............................................... 54 2. Definitions ...................................................... 54 3. Estimates of output and employment in SSE manufacturing .................. 54 4. Characteristics of the SSE sector ...................................... 56 The SSE firm: Subcontracting and demand ........................ 56 Labour use in the SSEs ...................................... 57 Capital stock ratios .......................................... 57 Credit .................................................... 58 Incomes .................................................. 58 5. Overview ....................................................... 59 iv 6. The Supply and demand for sse goods and services ........................ 59 Changes in purchasing power of social groups and demand ............ 59 Remittances ............................................... 60 The green revolution and differentiation of the peasantry .............. 60 The income and technical change effect of the green revolution ......... 60 Depreciation of exchange rates ................................. 60 7. Some inferences .................................................. 61 8. Policy areas ..................................................... 61 Credit policy .............................................. 62 Tax policy ................................................ 62 Infrastructure policy .......................................
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