It has become a convenient norm to state per capita income as a measure of general well being in an economy, albeit with some reservations and references to inequality. In the white collar coterie, ostensibly much fashionably concerned with developmen’, a Gini closer to zero gets scoffed at as an indicator of inequity in resource distribution, and that is about the be-all of it all. Given that most equality indicators give blanket assertions, the practical question really boils down to what an average person really takes home in this crisis-ridden economy. And the best way to answer that is to inquire into what he does.
The per capita income for FY11 stood at $1254 (Rs108,000) registering a 2.9 per cent increase in real terms over the preceding year. However, this figure does not say any thing about what an average urban or rural worker, or more prominently, an agricultural, industrial or service sector worker earns. It simply illustrates the value of output that is on average available for 175 million Pakistanis to consume. The real earners or the employed to be accredited for earning Rs18t worth of GDP only amount to 57m, which implies that an average person in Pakistan makes about Rs309,000 annually for a living.
Inspecting the sector-wise divide of incomes, the largest employer in the country is the agriculture sector, where 45 per cent of the labor force sources its living from. However, over the years the share of agriculture in GDP has declined to only 21 per cent, which implies that an average agricultural worker earns about Rs142,300 annually, much lower than the blanket average listed afore.
Similarly, the manufacturing sector employs about 13 per cent of the labour force but accounts for about 18 per cent of the GDP. This implies that an average manufacturing worker earns more than Rs420,000 a year. Moving on, the essential stars in the services sector are wholesale and retail trade, transport storage and communication and the finance industry. They employ 16.3 per cent, 5.2 per cent and about 0.5 per cent of the labor force respectively. However, gains for the average worker are strikingly higher in these sub-sectors, amounting to Rs335,000, Rs711,000 and Rs2.3m respectively.
As a result of this cross-sector disparity, the marginalised agricultural worker is increasing slipping into the informal sector which now employs more than 75 per cent of the rural work-force. Moving on to the second level of critique; according to the World Bank the richest 20 per cent of the population earns about 40 per cent of the total GDP, whereas the poorest 20 per cent is allocated only nine per cent of the GDP. If this statement were to be unequivocally applied to the agriculture sector, the average income per worker would come down by 40-50 per cent, explaining why more than 60 per cent of the population resides under the varying poverty line of $1-2/day.
A third critique is that the numbers stated so far are in nominal terms, which implies that crippling double-digit inflation leaves ‘low-end’ workers with very little in purchasing power terms. With inflation greater than 13 per cent and GDP growth less than four per cent, erosion of savings and deterioration of assets is the most probable outcome. While this happens, low income earners and their future generations lose all chances of ever coming out of entrenching poverty, and not surprising the same would hold for the economy, the sum of all these individuals.
In the arena of public policy, inequalities in the distribution of income need to be addressed not only for economic gains but also to avoid political unrest and upheaval. The government has adopted a very shot-term solution to tackle the issue of inflation and poverty through dolling out funds (Rs35b) under the Benazir Income Support Program, the efficacy and transparency of which is quite challengeable. The thrust or the core solution lies with sustainable income generation. Think beyond taxis, think beyond public employment and think beyond aid…think only skills if the policy makers must!
The writer is an economic researcher and
freelance journalist
