Significance of Poverty in Employment Opportunities

Poverty is multidimensional¹¹² with a wide range of factors are seen as determinants of poverty, like lack of access to income-earning opportunities; policy biases; lack of services and infrastruc-ture; population pressure; climatic shocks; the marginalization of women; institutional failure to ease rural people’s access to the skills, education, and health needed for escaping poverty; lack of freedom, knowledge, and women’s empowerment (ROVERE et al., 2006). The question arises how poverty struck response with lack or limitations of these determinants. They response in multiple way like specialization, intensification of farming, diversification of activities, migration, or exiting from farming (ROVERE et al., 2006).

11 MOLLY ORSHANSKY, an economist working for the Social Security Administration, developed the poverty line in the early 1960s, and the US federal government adopted it as an official threshold. For finding out poverty lines, the ORSHANSKY approach is a compromise between nutritional and income-based methods. Its calculation is simple. First find the minimum spending needed to satisfy nutritional needs, then gross up this figure by an appropri-ate proportion to allow for non-food expenditure needs. Hence, the Orshansky approach considers the social as well as a biological dimension of poverty (M^ACP^HERSON & S^ILBURN, 2000, p. 9).

12 Poverty is multi-dimensional in essence, as it encompasses not only income for the satisfaction of basic needs but also causal factors like human, physical, environmental, social, and political capital as a means of achieving income.

Poverty expresses itself in multi-dimensional outcomes, being stipulated by the socioeconomic, cultural, institutional, and political environment (Z^ELLER et al., 2006, p. 48).

BAULCH & MCCULLOCH, 2002, p. 171 citing MALIK, 1993 and JOEKES et al., 2000 also stated that based on evidence from household surveys, the national income accounts, and other sources there is a long-term downward trend in the incidence, depth, and severity of poverty in Paki-stan until 1988. During this period, three main factors apparently contributed in the poverty reduction─ strong agricultural performance, pro-poor public spending policies, and remittances from the more than 2 million Pakistanis who went to work abroad.

Since the late 1980s, the implementation of structural adjustment programmes under the guidance of international monetary institutions to deal with the external and internal imbalances in the economy raised the incidence of poverty (BAULCH & MCCULLOCH, 2002; GERA, 2007). A report of WORLD BANK, 2007b also highlights the dismal picture of rural Pakistan where nearly 35 million people remain poor (almost 80 percent of Pakistan’s poor), and rural poverty rates in 2004-05 were still at levels approximating those of the 1990s (for a comparison of poverty in Pakistan between 2000-01 and 2004-05, see Box 1).

Besides, the prevalence of widespread poverty, in the recent years nevertheless, there are en-couraging figures emerging out of Pakistan like 8.4 percent GDP growth in 2006-07, foreign reserves touching 15 billion mark, remittances reaching all time high to 5 billion dollars and a tremendous increase in stock market and exports. That’s why a recent world bank report compar-ing countries across the globe for business environment put Pakistan on top in the South Asia (WORLD BANK, 2007a). The report¹³ states:

“Pakistan ranks relatively well in starting a business—both globally and re-gionally. Reforms in the early part of the decade cut start-up time by half. Start-up now takes 24 days, 8 days less than the South Asian average (32 days) and less than Bhutan (62 days), Sri Lanka (50 days), Bangladesh (37 days) and

13 However, this report also highlights some area of concern regarding business conditions in Pakistan (Figure 3).

For instance, starting up business in Pakistan need a high number of procedures (11) compared to Bangladesh (8), Nepal (7) and Sri Lanka (8). In the region, only India requires this much procedures. Further, Pakistan’s procedures are cumbersome, require considerable documentation and involve six different agencies—the registrar of companies at the Securities and Exchange Commission, the Central Board of Revenue, the local tax authority, the Employees Social Security Institution, the Employees Old Age Benefits Institution, and the Inspector in the Department of Labor of the provincial government—and a visit to a specifically designated bank. Costs are 25 percent higher in Karachi than in other cities. The report further states:

“By removing the stamp duty requirement in 2004, Faisalabad, Lahore, Sialkot and Peshawar all eliminated 1 procedure, 1 day and considerable cost—16 percent of income per capita—

from the start-up process. Start-up time does not vary significantly across cities, with 2 more days required to register with the Registrar of Companies in Quetta than in Faisalabad, Lahore, Sialkot and Peshawar.”

dia (35 days). The cost is 21 percent of income per capita, well below the South Asian average of 47 percent, and compares favourably to all regional averages apart from those of the OECD (5%) and Europe and Central Asia (14%). Like all South Asian countries except for the Maldives, Pakistan does not impose a minimum capital requirement.”

Figure 3. The Business Environment in Pakistan

Source: W^ORLD B^ANK, 2007a.

Box 1. Poverty and Inequality Profile in Pakistan

Poor defined as those households in the bottom 40 percent of rural per capita expenditure distribu-tion shows that slightly more than half of non-farm households (52%) in rural Pakistan are poor (see Graph b in Box 1). Farmers (including both owners and tenants) account for nearly 43 percent of the rural poor households in 2004-05. Within the non-farm sector, rural poor are more concentrated in wage employment (35%) while share of self-employment (mostly petty trade) is around 17 percent. Highly unequal distribution of land is a major reason behind the prevalence of large propor-tion of rural poverty in Pakistan. For instance, nearly 37 percent of the rural households own land and majority (61%) of those with land own fewer than five acres, or 15 percent of total land. Due to this highly skewed land distribution most of the gains from farming sector accrue to landlords (high-income farmers). As evidence from a comparative analysis of Economic Surveys in Pakistan (see Graph a in Box 1), the proportion of all poor categories declined significantly except the ex-tremely poor who remained almost identical in the two survey periods of 2000-01 and 2004-05.

Similarly, the population classified as quasi-non-poor and non-poor have increased in 2004-05 relatively to 2000-01. This drop in the poverty can be explained by increased job creation in this period. Since 2003-04 and until the first half of 2005-06, 5.82 million new jobs have been created against an average job creation of 1.0-1.2 million yearly (GOVERNMENT OF PAKISTAN, 2006).

Source: GOVERNMENT OF PAKISTAN, 2006; WORLD BANK, 2007b.