Poverty in Pakistan
Challenges of a Fast-Growing Population

Poverty line in Pakistan

Current efforts and challenges

Poverty in Pakistan spreads across a variety of issues: a very fast-growing population facing lack of education, jobs, technology, capital and investment. But the country is committed to tackling the problem and the poverty rate has fallen by more than 10% in the mid-2000s. That’s nearly 15 million people who were lifted out of poverty.

The reason poverty became such an important topic in recent years is that more and more people now realize how important it is for peace, stability and economic development. Where there is conflict and war, there is only damage and suffering. In these conditions, not much can thrive but violence.

A fast-growing population

So obviously, Pakistan being caught between the US’s war on terror in neighboring Afghanistan and tensions with India, it has a dire need for stability. This is the ultimate condition to avoid social strife and to guarantee that the life of its population will get better. Stability can help with economic growth which in turn can alleviate poverty in Pakistan (if well-managed).

Another reason the government fears social unrest is that the population is growing very, very fast. And providing jobs, housing and education for everyone isn’t an easy task. In the last 10 years, the population in Pakistan has grown by 40 million, making it the 6th largest country in the world with about 180 million inhabitants.

Causes of poverty in Pakistan

Urban poverty & slums in Pakistan

According to recent estimates (2008), poverty in Pakistan - by national standards - concerns less than 20% of the population. However, after hitting this record low level, poverty is on the rise again, estimated somewhere between 30-40% depending on the source (government, World Bank). Efforts to fight poverty have been on-going since the 1970s, despite the “poverty bomb” of the 1990s due to corruption and poor government strategies that caused an increase in the number of poor.

The focus on education and health

Many Pakistani scholars focus on the lack of productivity and low literacy levels of the domestic workforce to explain poverty in Pakistan. As of 2006, only 50% of the population was literate and government spending on education was still only half of the average of many other developing countries (2% versus 3-4%).

However 3-4 years later, improvements led literacy levels to climb up to 60% of the population. The problem remains the inequality behind this number: nearly 70% of men are literate but only 45% of women are. Another problem that looms large: government health expenditure is one of the lowest in the world. Therefore it seems that the causes of poverty in Pakistan lie more in a massive health crisis at the moment, more than a productivity issue – although important too.

A fast-growing population

Other local expert also point at the growing population to explain poverty in Pakistan. This would explain the lack of investment in technology, as most GDP is used to feed and accommodate the growing population. However, the same problem in Asia has a different cause: traditional agriculture and good old habits die hard. Not that this is a bad thing, you wouldn’t want any country to lose its culture, as it has often happened in Europe (at least partially). The key is to find a balance and change what matters and what makes a difference in alleviating poverty. Old ways to farm land – while sustainable – are often not very efficient and sometimes embed a culture of exploitation or feudalism (slavery, serfdom).

Where the growing Pakistani population can become a problem is that because of the lack of infrastructure for education, the problem of inefficiency, poor agricultural techniques and illiteracy spreads all the faster across the country. Thus the little growth generated by the country is absorbed for the needs of the growing population in terms of jobs, food and housing. To sustain development, GDP growth should therefore be higher than population growth (as it is actually the case now). The other problem is in fact that of urbanization. Pakistan is indeed one of the most urbanized countries in South Asia, with a little over 50% of the population living in cities of more than 5,000 inhabitants.

Efforts to alleviate poverty in Pakistan

International aid & food crisis in Pakistan

What’s been done so far

About 10 years ago, more intensive efforts have been implemented to alleviate poverty in Pakistan. Among other things, there was a great investment in developing micro-finance, to allow small business owners and farmers to access micro-credits (that traditional banks wouldn’t give them). After a few years, the main government program for micro-finance was serving over 1 million people. Not bad.

But there were many other fronts to invest in: macroeconomic stability, education, corruption and developing social safety nets. The country actually did quite well with some of these: its GDP has been growing quite fast – although hit hard by the global financial crisis – about 5% in the 2000s on average, thanks to a more stable economy. This has created many new jobs, even though it was hardly enough considering how fast the population keeps on growing. Still the government has spent about $13 billion in anti-poverty programs in the first half of the 2000s.

New approaches to tackling poverty in Pakistan

One crucial area that Pakistan must now focus on is education and training (aka human capital). This is really an issue that no country can bypass if it is serious about developing its economy and its society. But of course it’s also a very controversial point because it’s an investment that threatens to change the society and its power balance. A more educated population is more difficult to deal with and it also creates many transformations in the way society and traditions works.

Child labor in Pakistan

Child labor in Pakistan

Causes of child labor

If you’ve done your homework, you already know from the article on child labor that this is a very complex issue: parents send their kids to work mostly because they don’t have the choice, if they want everyone in the household to survive.

Child labor is an extreme means of survival and it represents a lot of money to many families. This is why the best option isn’t always to ban it, but to encourage education and offer financial support to desperate families. A loan for business, a job or a study grant are as many tools that can make a huge difference.

The Pakistani case

In Pakistan, over 65% of working children are busy in agriculture, hunting and fishing. In fact child labor is more common in countries that have a great rural population – as families often need help in the fields. However because of the usual cultural bias against girls (in most developing countries), they tend to be employed more often in the fields than boys since parents usually prefer investing in their male kids.

Since 1991, child labor is banned in Pakistan. The problem – especially in cities – is that this ban pushes many kids to find more illegal jobs (prostitution, theft, drug trafficking…) where bosses obviously don’t care so much about the law. On the other hand, regular child labor also involves its own share of health risks: carrying heavy loads damages the backbone and working with pesticide-filled crops causes lung diseases.

Research outcomes: focus on poverty in Pakistan

Recent studies on child labor in Pakistan have shown that poor and not-so-poor families with lots of land were more likely to send their kids to work in the fields than families with little land. The reason is that obviously parents need to actively think about other sources of income when there isn’t enough land to feed everyone. And when there is, it seems like an obvious, easy solution to get help from your kids to survive.

Another study confirmed – with little surprise – that the poorer kids were, the worse they performed at school. Similarly, the more time they spent working, the more likely they were to drop out from school early. What to do then? First making these results known is very important. Many parents completely change their attitude once they realize that they’ve been favoring some their kids (boys) over the rest (girls).

Yet, many don’t change anything, but a majority isn’t actively aware of the social and cultural bias against girls that pushes them to do so. Then again, it’s also a matter of education to show that with similar chances, girls can achieve just as much as boys. One obvious way to decrease child labor is also to provide school grants for kids who live in poor families, so that their parents don’t have to make a choice between sending them to school or to the fields. It’s also crucial to make sure that kids attend school regularly – which should be a condition of receiving the financial support.

Inequalities and poverty in Pakistan

Inequalities in Pakistan

Income inequalities and GDP growth

There are several decades-old studies on the connection between income inequality (gap between the revenues of the richest and poorest) and economic growth that show how inequality can affect the overall performance of a country.

Most of this research actually worked backwards. Back then they believed that with wealth created from pure economic growth would eventually “trickle down” and thus reduce the inequalities in Pakistan (or anywhere else for that matter). Of course, what happened in reality was very different. The rich usually got richer and that lead to all kinds of new problems in Pakistan; from corruption to elitism and social discrimination (rich vs. poor).

Equality & accessible finance

The advent of micro-credit and much more diverse financial tools accessible to the entire population has been of incomparable help in reducing the wealth gap between the rich and the poor in Pakistan. It has enabled many Pakistanis to access loans – be it for education or business purposes, which in both cases lifted many out of poverty.

Making financial services (e.g. loans) accessible to everyone is one of the most effective tools to alleviate poverty worldwide. It’s all about providing the poor with the same rights as better-off citizens. Without equality, there is no freedom possible. Equality of access to social services and to enjoy the same benefits as any other citizen – be it in banks, tribunals or hospitals – is crucial to nurture stability and prosperity for any country. It’s only once the poor can borrow, invest and start small businesses that things begin to change, little by little. Keeping the economy “healthy” is important, but fluctuations in GDP have in fact very little impact on inequalities within a country.

Infrastructure, economy and geography

What really matters in terms of macro-economy and growth is to invest in infrastructure and in sound systems to regulate the economy (e.g. inflation, stable food prices, corruption). The first one will help exchanges within the country, a proper legal system will help settle disputes between businesses and/or consumers, the second aspect will keep the economy afloat so that people are confident enough to invest in it.

Therefore developing the poorest areas in Pakistan is crucial to help them develop… and access the same services as normal Pakistani citizens do. Roads, telecommunications, transport systems, everything matters. With the disastrous floods that plagued Pakistan in recent years, this is even more important than ever. And more than ever, geography matters too. People in remote places are hit hardest by floods and poverty as little government relief or help can reach them easily. Exclusion and marginalization from the rest of the country are huge factors increasing extreme poverty.

Conclusion - Tackling poverty in Pakistan

How the government can help…

The problem with the way most governments fight poverty is they don’t realize that a lot of people go back and forth between poverty and precariousness (i.e. chronic poverty). Some years are (slightly) better than others, some are terrible. These people are the hardest to target and yet they represent millions of people who aren’t included in the estimations of poverty in Pakistan.

It’s important that the government runs specific programs aimed at helping these people (well, first identifying them) and finding the right solutions for them. Among policies that prove most useful, social transfers to educate these families’ children are most effective in both short- and long-term. It prevents parents from sending their kids to work when they need help and a very small amount ($1 per month) can make a huge difference in alleviating poverty. When combined with training for parents, who can then understand the value of education, this type of anti-poverty program can make a big difference.

Of stability and trade

Peace is good for business, everybody knows that. But economic stability – in particular inflation – is also key for everyone to dare start new businesses and trust that things will turn out good. In the long-run, inflation is central to alleviate poverty in Pakistan and the country can’t do without a stable economy. Investing in the right sectors then comes as the next priority. Recent research has shown that the modernization and development of agriculture in Pakistan has lifted millions out of poverty. But many factors also influence this success: climate, geography (e.g. remote villages), human capital (e.g. education) and the presence of infrastructure.

Big countries like Pakistan with huge workforce need to focus on developing sectors that employ millions of people (known as labor intensive industries), such as agriculture and manufacturing. And Pakistan has the resources to turn into a producer of high value-added goods, but for that it needs to liberalize its trade rules to make it easier to both manufacture at home and export goods. This would help the country gradually reduce its dependence on humanitarian aid.

The government needs to be reminded that providing jobs for everyone remain one of the most ancient and effective ways to reduce poverty in Pakistan and nurture a stable, harmonious society. Developing the economy would also help fund current anti-poverty programs via taxes on the wealth created.

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