Given Pakistan’s currently tenuous economic and security situation, coupled with increasing unemployment, more women and children will join home-based work, which is not regulated and where remuneration is extremely low

The government has just announced that the minimum wage for labourers will be increased by Rs 1,000 — from Rs 6,000 previously — under the new Labour Policy 2010. According to this new policy, contract employees in the public sector will also be regularised soon. The extent to which this pay raise will enable labourers to adequately meet their household expenditures amidst persistent inflation remains a problem, while the wisdom of regularising contract employees and further burdening the ill-performing public sector is an even trickier dilemma. This article aims to draw attention to yet another related issue: the growing problems confronting the informal workforce across our country.

There is also a wider context justifying the need to focus on the informal sector. It is now being recognised that while the global turmoil’s effect on formal economies in developing countries has been a source of some concern for national governments and the donor community, its impact on the lives of the multitudes engaged in the informal sector has received little or no attention. This is despite the fact that the informal sector is very large in most developing countries, and individuals involved in it are among the world’s poorest people. Moreover, as formal labour markets constrict, retrenched workers often turn to the informal economy. This is particularly true in developing countries, where there is often a paucity of public services or programmes to support the unemployed.

Informal enterprises and informal wageworkers are affected in many of the same ways as formal firms and formal wageworkers. Informal workers suffer directly and indirectly from shrinking consumption and declining demand crucial to their livelihoods. Home-based workers who produce for global value chains have, particularly, experienced a sharp decline in their work orders. Informal wageworkers are also often the first to be laid off, much before those with formal contracts.

Moreover, unlike some of their formal counterparts, those working informally have no cushion to fall back on. Thus, as if working conditions were not harsh enough already, the global economic downturn has made informal sector workers further vulnerable to longer hours and lower wages. When times are tight, the middleman takes a larger share of the cut and squeezes their wages further. Home-based workers who work for local markets have also reported increased competition and many have had to reduce their prices to remain competitive. Even street vendors have seen a significant drop in local consumer demand.

Food and fuel price rises and inflation are pushing families of informal workers into further impoverishment. Informal workers are being forced to overwork, take on additional risks, cut back on expenditure, including those on food and health care, and still their incomes remain unable to meet household costs.

To illustrate the implications of these issues, let us take a closer look at the case of Pakistan in particular, where there are nearly nine million home-based workers. There is a wide spectrum of cottage industries in Pakistan — for making incense sticks and matches, designing bangles, polishing surgical instruments, embroidering shawls and dresses, carpet making, etc. — all of which are typically operated by informal workers. Domestic work and different types of small workshops and shops across the country also employ workers informally. According to official figures, around 65 percent of the country’s female workforce works in the informal sector, although NGOs say the number is closer to 80 percent.

Organisations working for the labour rights of home-based workers in Pakistan stress that, over the years, the informal sector has gained greater significance in the country. Yet work carried out from home is often equated with the parallel or ‘black’ market and is, therefore, looked on pejoratively by society. Even public policy towards the informal sector is ambivalent and contradictory, often oscillating between benign neglect and periodic harassment.

As home-workers do not come under the definition of a worker in Pakistan’s labour laws, they cannot go to labour courts, nor are they eligible for state benefits such as old-age pension.

The Services Tribunal (Amendment) Bill 2010 has granted protection against wrongful dismissal to a large number of workers. Moreover, the new bill meets a longstanding demand of workers’ organisations by enabling employees to take their grievances to labour courts, labour appellate tribunals and the National Industrial Relations Commission. However, the rights of the vast number of informal workers in the country remain unprotected by this law.

Given Pakistan’s currently tenuous economic and security situation, coupled with increasing unemployment, rising costs of living and simultaneous public sector spending curbs, it is feared that more women and even children will join home-based work, which is not regulated and where remuneration is extremely low.

Some NGOs have been working with the government to draft a national policy on home-based work that highlights issues such as their right to form unions as well as ensuring workers’ rights, safe working conditions, fair wages, medical treatment, and access to credit. However, experts involved in this process estimate that their attempts are unlikely to translate into effective legislation any time soon.

Besides the need to take the issue of the national law for the informal sector more seriously, our government should also ratify the International Labour Organisation’s Home Based Work Convention 1996.

Moreover, given that not much research has been done on how to address the needs of informal workers within the country, some relevant suggestions collated by international organisations may be considered. For instance, financial support, in the form of low-interest loans could be an essential response to help informal workers in their work and families. These loans can help the purchase of raw materials and stock, as well as tools and equipment for business during the economic downturn. Informal workers could also benefit from well-designed capacity-building opportunities that help build and upgrade relevant skills in specific occupations, for which there is international demand as well.

Given the current government’s inaction, other stakeholders like the media and the judiciary must step up and take a more active part in helping informal workers secure their long-neglected rights.

The writer is a researcher. He can be contacted at ali@policy.hu

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