IN the current crisis, one major problem under the spotlight is the loss of jobs and wages owing to the lockdown forced by the coronavirus outbreak. Coming on the back of rising unemployment and poverty as a result of the economic downturn, the problem of workers’ livelihood has assumed a proportion that cannot be glossed over by the government or the private sector.

Given the grim scenario, there cannot be business as usual. A crisis is a signal for transformational change. For the past few decades, we have seen crises following crises in rapid escalation. It is time to shed orthodoxy and adopt innovative ways to return to the path of rapid socio-economic progress.

No doubt the cash-strapped government is making efforts to ensure the security of jobs and wages to as many workers as possible within its limited resources. A sum of Rs200 billion has been earmarked for cash assistance by the authorities for daily wagers working in the formal industrial sector and for those who had been laid off as a result of the lockdown. There is also a move to raise salaries of federal employees from the next financial year which will be duplicated at the provincial level.

Workers and small businesses in the informal sector would not be eligible for any relief. The government says that it has just adopted recommendations and protocols of the International Labour Organisation to set up a national database of all informal workers so that they can be given due rights like health facilities, social and job securities.

It is time to shed orthodoxy and adopt innovative ways to return to the path of rapid socio-economic progress

In the formal sector, the primary responsibility for workers’ livelihood lies with industry — the largest urban employer. Expecting a positive response, the government has asked big industrialists not to lay off labour and pay their monthly salaries. The State Bank of Pakistan, according to Prime Minister Imran Khan, will also lend cheap loans to industries which do not lay off workers and pay them their monthly salary.

Official labour policies are somewhat confusing. In the case of privatisation, the right of employees to the security of jobs, including professionals, remains unrecognised. In hard times, the private sector pursues a flexible labour policy while the economy’s quality of growth — lack of required diversification and adaption of technology — has not generated enough new jobs. The employees of disinvested units are only compensated for the loss of jobs by golden handshakes, without any alternative employment opportunities in view. Even in some government organisations employees’ salaries are quite often not paid for months together.

Normally workers’ wages are not linked to the rate of inflation, and labour compensation has fallen in these times both in nominal and real terms in most segments of the economy owing to double-digit inflation. Officials’ ad hoc decisions to increase minimum wages are not honoured universally by all industrial sub-sectors, even by those with rising productivity. The government does not show any interest to enforce the minimum wages. The official announcement only serves as an indicative wage. Despite double-digit inflation in the situation prevailing in the country, any move for a minimum wage increase for industrial workers may be ruled out.

Owing to the strong opposition of their workers backed by some politicians and reluctance of strategic buyers to take risks, and as witnessed over the past decade or more, it has become next to impossible to privatise bleeding state enterprises. The government has failed to even restructure and make any of them financially viable.

The prosperity of both firms and households are largely linked together. The industry needs consumers with better purchasing power and not impoverished households to boost production and reverse the current recessionary trends. Somehow the vital role of the people in economic and social progress is not recognised. Whether it is savings and term deposits in banks, investment in National Savings Scheme or tax revenue, the bulk of it all, is contributed by teeming millions of lower- and middle-class income groups.

Unlike China, where poverty was reduced at an unprecedented pace and resultantly the rates of savings and investment there hit one of the highest in the world, domestic savings and investment in Pakistan are low. This is due to the high level of unemployment, low paid jobs, idle manpower and mass poverty. Despite the drastic cut, unsustainable imports continue to feed the sizeable domestic demand.

Similarly, the industry cannot grow rapidly without prosperous domestic consumers, as the international recession is knocking at our doors. In a recent statement, Prime Minister Imran Khan reminded the people that islands of prosperity cannot live in an ocean of poverty.

Given the troubling economic scenario, local firms not only need to work for the shareholders but all stakeholders particularly their employees and consumers. Every business entity needs to take care that it is not accused of greed. It is not merely an issue of ethics and morals but, more important, enlightened self-interest of the community. As Nobel Prize winner Joseph Stiglitz says: “development is about transforming the lives of the people and just not transforming the economy.” The view that the current global crisis is different from other crises is gaining ground worldwide with Stiglitz arguing that we can’t play the same playbook and need to seek a new set of solutions.

After announcing the emergency stimulus and relief package the PTI government has moved to review the spending priorities indicated in its medium-term Budget Strategy Papers 2020-23 in the light of the possible negative coronavirus-related effects on the document’s economic projections. A cabinet meeting held on March 17 decided that the prime minister’s financial advisor Dr Hafeez Shaikh should revisit expenditure priorities in consultation with ministries/divisions. Interrelated issues that cropped in the meeting included giving spending autonomy to the ministries/divisions through block allocations in the budget and the ministries/ divisions be empowered to decide on the bifurcation between development and non-development expenditure. Dr Sheikh says the issue is being discussed.

However, looking at the big picture, a new strategic approach is required to reconcile the diverging interests of the few and the many and promote their commonnalities. Nobel Prize winner Paul Krugman is of the view that that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.

He says it is an era of depression economics which the eminent scholar describes as a study of the situation where there is free lunch if we can only figure out how to get our hands on it because there are unemployed resources that could be put to work. In Pakistan, there is a lot of idle manpower and abundant resources waiting to be harnessed through a people-centric development policy.

Published in Dawn, The Business and Finance Weekly, April 6th, 2020