This article is not going to be about individual attitudes, social or psychological societal problems. It is going to address an issue from a purely economic standpoint. The aim is to unravel the most overlooked economic emergency of Pakistan. Divided into two parts, it will reveal the effects of the absence of women, in both forms, as hands and heads, on the economy of Pakistan.
The case of missing hands…
Take the analogy of a human body for a developing economy. We normally have two hands and two legs. Any human being using only one hand and one leg for all kinds of physical activity will, on a balance of probabilities, be much less efficient and able in performing even the simplest of tasks.
Now consider the industrial economy of Pakistan, consisting of two sets of hands: male and female. Both are equally capable in performing most physical tasks, with the exception of those tasks requiring a certain threshold of physical strength. However, our economy like the human body in the example above is only half as efficient at producing output.
During my visit to China, I came across an eye opening reality in textile manufacturing. Over 90% of the labour employed in these factories consists of women, a huge contrast with the situation in similar factories of Pakistan.
Statistically put, female labour participation rate of Pakistan stands at the lowest level in South Asia, at a disappointing range of 20-25% (based on estimates of IZA world of labour and the World Bank). We are behind each and every South Asian industrial competitor when it comes to utilization of female human resource. In Bangladesh, (57-58%) the participation rate is more than double compared to our home country. Outside South Asia, we are dwarfed in this league by China (64%), Vietnam (72%) and Thailand (64%), Malaysia (44%), Indonesia (51%).
The barriers to participation of labour in these manufacturing may be cultural or religious, but it has deeply damaging economic effects.
Firstly, any unemployed/underemployed woman will most likely become a burden for the economy. Consumption, as opposed to production, will increase. Take the example of a classic Pakistani nuclear family, where one laborer is responsible for the consumption needs of at least four people; one wife and three children. This will only lead to poverty, because consumption will overtake output, resulting in rapidly increasing prices of basic necessities. It will always lead to a fall in real income for one of the most impoverished segment of society. It could theoretically be a huge reason behind the massive debt financing of our federal government budget, which has been, since the past decade, financing over consumption.
Take the analogy of a human body for a developing economy
Secondly, from the point of view of the industry, labour will be paid more than what its competitive advantage is worth. This is important when a country is betting on producing a high range of output rather than quality output. The competition is between thin margins resulting from low labour costs. Most developing countries need to bet on high rates of production for real economic growth. If the available labour force, like the case of our country, is discounted by more than 50%, the industry has to pay more to the average labour than what their efforts should be worth. Minimum wages would be at a level that is more than the competing developing economies because the survival of labour in the aftermath of increasing prices (financed by foreign debt), become more and more difficult.
By contrast, increased female participation in the industry will only cure these economic ills. Women workers may add to the supply of total workers in the economy, decreasing the wage rate equilibrium point. While wages may fall, total output will increase, having benefits for the employed family, the industry and the economy. Since women workers would add output through their efforts, it would result in a less than proportional fall in wage rates. Assuming a 20% fall as a result of 50% additional workforce might be a realistic comparison. Since labor participation will result in an increase of output. Now the family sustaining on a $100 dollar minimum wage, will have $160 – 60% additional income to spend on basic necessities. As far as the industry is concerned, a fall in wage rates will only be good news for manufacturers competing solely on low labor costs in the country, giving them more competitive advantage and adding to the export revenue of the country. The additional income may also create room for personal savings or the education of currently employed child labor in the industry of Pakistan. Hence, creating long-term economic growth through micro-investments on human capital.
…And the lost heads
It is assumed that 1/4th of a population consists of those with the highest I.Q level in the country. But this discussion of the brains, is not limited to just IQ level, but extends to all other set of skills that are present naturally in all human beings on a balance of probabilities.
Assuming that the intellectual capital of Pakistan according to this equation consists of 50 million people as a matter of genetic probability, nearly half of our intellectual capital (20 million people) remains underutilized as compared with other developing economies of our size. Amid huge immigration, creating a massive brain drain in our country, the need for utilizing the other half becomes imperative.
The realization should have been straightforward the day Arfa Karim and not any Pakistani boy became the youngest Microsoft certified professional in the world. However, it has not resulted as of yet.
In our economy, as of now, only a negligible percentage of women form a part of the senior management of any company, research facility, governmental organization, industry or service providers. Women unlike men do not get the time to learn by experience and contribute to local organizations competing at an international level. We are missing out on nearly half of our available ideas – significantly more than our counterparts,
Hence the quality of the output we produce is drastically reduced in the age of ‘knowledge economy; as beautifully illustrated by our planning minister Ahsan Iqbal in his vision 2025.
If we accept the above argument, we will be unlikely to find satisfaction in limiting the intellectual capital of women to relatively niche sectors like fashion, cooking and design. We will be more likely to apply it instead to the sectors that really need that capital including science, state and enterprise.
The value of household work
There is an argument by economists supporting the opportunity cost analysis that the value of household work by the female population also produces output for the economy. While that argument may have some merit, it is unacceptable for two major reasons. Firstly, it has to be proved that women raising children alone and performing household tasks will be much more efficient than with any other effective forms of support from extended family, day care centers and cleaning services.
Secondly, even if mothers alone can raise quality children, the quality is put in question when the economics behind these social fundamentals is highlighted. An impoverished childhood consisting of forced child labor, malnutrition and domestic violence is definitely not conducive for raising quality children.