Is Informal Sector Employment Marginal to Formal Sector Growth?

Abstract

Pakistan has adopted a neoliberal regime to open the economy to global competition and reduce the role of the state. This directional change brought increased flow of overseas remittances, speculative investment, and consumerism. Consequently, the economy in mid-2000s grew but commodity-producing sector contracted. Public sector spending has been falling, especially on social sectors. There are inadequate provisions for social security and employment based income guarantees. However, this growth and stability was short lived and there is now a fragile state and slowing economy. In the absence of an effective regulatory role of the state, and due to the failure in developing a long-term strategy to harness the labour force potential, there is a huge informal sector existing side by side with the formal economy. Almost 22 million of the employed labour force is earning its livelihood in streets and the government has no record of it. The informal workers can be categorised as self-employed workers and wage workers, doing diversified jobs from petty traders to small producers and from rickshaw driver to shoe shiners. It is difficult to measure the value added contribution of the informal sector in Pakistan. Indirect estimation approaches on the basis of employment and hours worked have been used to estimate the contribution of informal economy. For instance, Idris (2008) estimates the share at 36.8 percent of GNP, which is significant. Arby, Malik and Hanif (2010) measured the size of informal economy in Pakistan through a monetary approach. They find that the size has declined considerably.

Determinants of Informal Competition faced by Formal Firms inPakistan: AnEmpirical Evaluation from 2013 World Bank Enterprise Survey

“…The results of this study are an important contribution to the already existing literature in the case of Pakistan, as no study has been attempted so far to determine the extent and intensity of informal competition faced by formal firms using the WBES data. The available literature is limited either to the calculation of the size of the informal sector or to the reasons for the existence and progression of the informal economy (Arby, Malik & Hanif, 2010;Kemal & Mahmood, 1998;Williams, Shahid & Martinez, 2016;Tahir & Tahir, 2012). The novelty of the current research is that it not only comes up with the significant variables determining the informal competition faced by formal firms but also determines the major(significant) variables that affect the severity of informal competition faced by formal firms.…”

“…A sufficient amount of work is present in an international context that investigates the informal sector and competition arising from it that affects the formal sector; nonetheless, the literature on the informal economy in the case of Pakistan is limited only to a few domains. Some studies have tried to estimate the size of the informal economy of Pakistan, while others have investigated the reasons for firms' enlisting and continuance in the informal economy (Kemal & Mahmood, 1998;Williams, Shahid & Martinez, 2016;Tahir & Tahir, 2012;Lent et al, 2019;Hayat & Rashid, 2020). Apart from these domains, there exist evidence of causation inquiries pertinent to the informal sector of Pakistan, for instance, Wu et al, (2019) analyzed the nexus between trade openness and an expansionary informal sector; a flexible informal sector is expected to yield the benefits from liberalization.…”

“…To the best of our knowledge, all the previous studies in the domain relevant to the under study, have been conducted, predominantly in Latin America (González & Lamanna, 2007), Southeast Europe (Hudson et al, 2012), and Sub-Saharan African countries (Ali & Najman, 2017). The literature on the informal economy in the case of Pakistan is limited either to the calculation of the size of the informal sector, or to the reasons for the existence and progression of the informal economy (Arby, Malik & Hanif, 2010;Kemal & Mahmood, 1998;Williams, Shahid & Martinez, 2016;Tahir & Tahir, 2012). Analysis of determinants of informal competition faced by formal firms in Pakistan is an untapped area; it becomes pertinent in the current scenario of the proliferating informal firms in Pakistan that an insightful study should be attempted to identify the core variables either relating to the firm's characteristics or regulatory measures to determine the extent and intensity of informal competition faced by formal firms.…”

The waste collectors in Sindh, Pakistan: an exploratory study of the environment-friendly self-employment

“…Informal laborers include self-employed and salaried workers who perform a wide range of tasks, from small shopkeepers to small manufacturers, rickshaw drivers to shoe shiners. In Pakistan, measuring the added value input of informality is difficult (Tahir & Tahir, P., 2012). Due to poverty, they are hard to work, get paid small amounts, are isolated, work long hours, are both married and unmarried, and have little or no education.…”

The role of the pepenadores and their relationship to sustainable development: A proposal for municipalities

“…Bidegain (2011) determined that within the process involved in the activity of pepenadores they obtain the lowest economic benefits, Gill (2007), who studied the relationships between sellers (recyclers) and buyers, of recycled materials, denounces serious disadvantages in transactions. Tahir and Tahir (2012) analyze the situation of the informal sector, especially for women, showing how the petty level of income and lack of studies, the lack of contraceptive methods, high birth rates and conditions of marginality, influence the Difficulty accessing decent and formal work. They are also considered in Bonner and Spooner (2011) who warn of the great opportunities that could arise for informal women recyclers under solidarity forms of organization.…”