Poverty policy | Political economics



he annual budget invariably includes an allocation of funds for the poor. The list of poverty reduction and social protection measures is long and has visible overlaps.

With few exceptions, each new government repackages the previous government’s anti-poverty initiative, with little effort devoted to crafting a unique end product. The Benazir income support program and Ehsaas have been among the most well-known anti-poverty initiatives since 2008.

While the BISP and Ehsaas programs may have the same target population, the Ehsaas program had a much broader reach. Among other things, he subsidized basic commodities through utility stores and provided free food and free shelter. Minimum wage laws are a common part of the anti-poverty agenda.

It was only recently that Prime Minister Shahbaz Sharif set the minimum wage for unskilled workers at Rs 25,000 per month. There are reasons to believe that a significant part of the working population receives less than the legal minimum wage.

Irrespective of the political identity of the government in place, the target population is, in principle at least, chosen on the basis of certain objective criteria of deprivation and vulnerability. What are the criteria for inclusion of social protection programs in Pakistan?

Consider the BISP first. The BISP integrates into its social safety net the “marginalized and disadvantaged sections of society, especially women”. Its goal is to “fight poverty and bring about lasting positive change in the lives of persistently excluded and deprived families”.

There have been media reports documenting or alleging misuse of BISP and Ehsaas funds. Let’s agree for the sake of argument that some leakage from poverty reduction programs is inevitable and can be ignored in the interest of continued effort. The real question is how successful these interventions are in achieving the goal of poverty reduction and bringing lasting positive change in the lives of persistently excluded and deprived families. Unfortunately, the answer to this question is not satisfactory.

The reasons why the social safety net fails to end poverty in Pakistan are complex and multifaceted. No poverty intervention can succeed if it does not address the root causes of poverty. The poverty rate in Pakistan was 55% in 2005. It improved to 39% in 2015 and further decreased in 2018. However, it must have increased significantly during the Covid-19 years and due to the hyperinflation of recent months.

There is little disagreement that poverty is generated by lack of education and poor health. He systematically demonstrates an intergenerational journey.

From this point of view, the amount allocated to individual households is too low to significantly start the vicious circle of poverty. For example, under the Benazir Income Support Scheme (BISP), 246 billion rupees was allocated out of a total expenditure of 8,487 billion rupees (2.89%) in the outgoing financial year. Comparing this ratio to some of the other expense items can be revealing. In the financial year 2021-22, the budget allocation for payment of interest on loans was 3,060 billion rupees (36%), on defense services 1,370 billion rupees (16%), military personnel pensions alone cost 360 billion rupees (4.2%) .

In other words, Pakistan spends about 56% of its budget on debt servicing and defence. The resources allocated to social protection are too small to support a long fight against poverty, and even less to give a chance of overcoming it.

With insignificant funds allocated to the fight against poverty, social protection risks becoming an empty show of complacency. It should come as no surprise that the poor and marginalized are fed up with platitudes.

Social safety nets are so scattered across the population that they rarely bring about meaningful change in people’s lives. The Imran Khan-led government had launched an ambitious Ehsaas program – an umbrella covering 288 policies and programs.

One of the components of the Ehsaas program was the Ehsaas Ration Riayat (ERR) program launched in November 2021. The ERR aimed to reduce the impact of inflation on marginalized segments of society. Rs 120 billion has been set aside for targeted subsidies to cover 20 million families (130 million people) nationwide. The average household size in Pakistan is just over six (6.24). Rs 1,000 per month for an average family therefore amounts to only Rs 5 per person per day. The amount is obviously a pittance unlikely to mitigate the impact of inflation.

Another initiative under the Ehsaas program was Koye Bhooka Na Soye (KBNS). It sought to eradicate hunger in the country by operating 16 trucks in seven cities – Rawalpindi, Islamabad, Lahore, Faisalabad, Multan, Gujranwala and Peshawar.

Prime Minister Shahbaz Sharif recently announced a relief package for around 14 million families with immediate aid of Rs 2,000 per month. This translates to Rs 10.42 per person per day.

Given that the current level of public expenditure on social protection for the marginalized sections of society is too low to make a real difference in the fight against poverty, the paradigm needs to be rethought. Evidence from several developing countries highlights compelling arguments for allocating funds for skills development. The best way to achieve this goal is through vocational education and training.

By definition, vocational education aims to expose the individual to short-term education and training programs in order to acquire the necessary skills for specific jobs for which there is a demand in the labor market. The data show that vocational education is associated with a significantly higher salary level. In India, for example, people with vocational training earned 37% more in the primary sector and 17.6% in the secondary sector than people without vocational training. A similar study in Pakistan found that the Federally Administered Tribal Areas Development Authority (FATA-DA) provided vocational training to over 52,000 people in 70 technologies/trades. After completing the FATA-DA training, youth employment increased by 1.94 times and monthly earnings by 1.63 times.

India has allocated significant resources to promote vocational education. The list of skills imparted to young Indians includes automotive, retail, IT-ITS, media, rubber, health, gems and jewelry, electronics and hardware, agriculture , telecommunications, leather, food, logistics, plumbing, capital goods, construction. , life sciences, aviation and aerospace, steel, energy, mining, textiles and hand weaving, clothing, beauty and well-being, handicrafts, tourism and hospitality, infrastructure equipment, sports, oil and gas, green jobs, people with disabilities, domestic worker, furnishing and assembly, instrumentation, strategic manufacturing and management.

In Pakistan, under the Technical and Vocational Education and Training Reform Initiative, an impressive array of skills are being imparted in agriculture, energy, information technology and services. It is necessary to make the link between these skills and the beneficiaries of Ehsaas and BISP.

It is time to consider an overhaul of technical education because the returns from general education are often meager. Skills acquired in general education, particularly in secondary schools, are often unrelated to labor market demand.

In addition, rigorous fiscal adjustment is needed to reduce poverty. With insignificant funds allocated to the fight against poverty, social protection can become an empty show of complacency. It should come as no surprise that the poor and marginalized are fed up with platitudes. A fancy word that has recently entered our national parlance is “tough decision,” a euphemism for shifting the burden to the unfortunate.

Consider the massive rise in energy prices. The Pakistani elite is much better organized and strategically placed to safeguard its interests. However, a reduction in the benefits of the civilian and military establishment comes at a cost that no political government dares contemplate. Widening the tax net and the tax base is a complex task, and taxing windfall profits from real estate activity is not “politically correct”. Then the ax falls on the poor and the unfortunate.

The author is Associate Professor in Department of Economics, COMSATS University Islamabad, Lahore Campus

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