Informal Enconomy of Pakistan

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The Definition of Informal Economy

In each country of the world, the existence of an informal economy cannot be ignored, the informal economy can be defined as the economy which is not reported in official figures is known as the informal economy. There is no protection to the labor of that economy and even they are not registered. The people do more work in very low package or even we say at nominal packages. Grey economy is also another name of this economy. These workers are specified as the street hawkers, the workers who work in any construction work are called the persons of the informal economy. These people get no protection from and state and similarly, they do not pay the taxes to the state. All employees or workers who perform the lobar activities from outside of the registered government labor market are part of this economy.

The Importance of the Informal Economy

This economy is very important, because it contributes to the development of any country, despite that the workers are getting very low wages in this economy even then it contributes to increasing the GDP of any country.  

Informal Economy of Pakistan

The informal economy or Grey economy exists in every country of the world. So, similarly, in Pakistan, this economy exists in large numbers.   Where workers have limited access to labor welfare services. The Labor Force Survey 2017-18 states that the informal sector accounts for 71.7 percent of the employment in main jobs outside agriculture, more in rural areas (75.6 percent) than in urban areas (68.1 percent). Overall, there has been a slight decrease in the informal sector if we compared to the Labor Force Survey 2008-09 data on the informal sector which shows the informal sector accounts for more than 73.3 percent of the employment in main jobs outside agriculture. The key sectors of employment in the informal economy are wholesale and retail trade manufacturing, community/social and personal services, construction, and transport. Following the 18th Constitutional Amendment, in 2010, which resulted in the devolution of labor administration from Federal to Provincial Governments, efforts have been made to formulate provincial labor policies. In 2018, the provincial governments of Punjab, Sindh, and KP developed their respective Labor Policies with a focus on contemporary labor issues and challenges. The Punjab Labor Policy 2018, incorporates, for example, areas such as the effective implementation of labor standards, social dialogue, improvements in workplace safety, living wages, child and bonded labor, awareness-raising, and excellence in labor inspections regime. The informal economy in Pakistan is characterized by several decent work deficits and challenges including rights at work, child and bonded labor, social protection, lack of sustainable employment, working poverty, gender-based discrimination. The DWCP (2016-2022) has focused on promoting decent work in the rural economy, which constitutes a large segment of the informal economy in the country. Besides, rural economies are characterized by low productivity, informality, and weak enforcement of laws, among others.

Special thanks to the international labor organization, please feel free to give us feedback on this article by giving comments below.


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