The divide that drives unrest

The dilemma in our economy is that the formal corporate sector demonstrates growth and social compliance and yet unemployment remains high, leading to social unrest. This reflects a partially regulated economy in which different sectors face uneven challenges and opportunities.

The formal corporate sector, operating within the global marketplace, has responded to free trade by becoming leaner and more efficient. This has been achieved through better technology, automation, and optimized processes. While this boosts corporate results, it also means fewer jobs are available, especially as companies prioritize efficiency over expanding their workforce. The corporate sector's ability to adapt to global competition by shedding jobs contrasts with the non-documented or informal sector, which lacks the same capacity for efficiency gains and faces declining demand for its products.

Thus, the formal sector's focus on efficiency leads to job cuts, while the informal sector struggles to generate employment due to declining demand. This contributes to rising unemployment, particularly as more people enter the workforce. The gap between the formal and informal sectors widens, with the formal sector thriving but employing a smaller portion of the workforce, while the informal sector stagnates. The informal sector's inability to compete or innovate due to lack of regulation and resources exacerbates the situation.

With fewer jobs available, particularly in labour-intensive industries, frustration grows among the population and can lead to social unrest. This unrest is driven by the disconnect between corporate success and widespread unemployment.

The partially regulated nature of the economy means that, while the corporate sector may be compliant with global standards, the informal sector remains vulnerable. Lack of oversight and support for the informal sector leads to its decline.

Addressing this issue requires balancing economic growth with job creation, ensuring that policies support both sectors. Policymakers need to focus on encouraging innovation and growth in the informal sector while supporting job creation initiatives in the formal sector that don't solely rely on efficiency gains at the cost of employment.

The failure to improve social indicators is not because of lack of resources but due to poor governance and planning; our planning on the social front is usually half baked and social-sector projects usually remain non-operational after completion.

Ours is a soft state, in which few rules are ever enforced. Everyone is aware that implementation rules and regulations in Pakistan are lax. This is the reason reputable foreign brands that outsource their products from Pakistan send their staff to conduct social compliance audits which mandates that all country laws and compliance regime provided by the buyer have been fully adhered to.

These companies give prime importance to the safety and welfare of the workers and their concerns are much higher than those embedded in local law. This social compliance audit by foreign firms is at the cost of exporting firms which is very high.

More than half of the employment in the country is generated by the non-documented sector. Non-documentation flourishes because of unfair trade rules. Operating formally is a cumbersome job for the poor. Most informal operators remain poor as scaling up without formalization of trade or business is impossible.

What we need is not more drastic laws or rules but fairer implementation of existing laws which in most cases are the same as practised in better governed economies. For example, water pollution would go away if industries are forced by law not to pollute water channels. The issues related to doctors and teachers would not be possible if those indulged are imprisoned for taking public money by fraud. Strict accountability at the bureaucratic level must be ensured.

The writer is a freelance contributor.