workers are denied all benefits. This uneven competition slows or stops the growth of the formal sector. Resultantly, the formal sector is constrained to operate at below its installed capacity, losing the advantage of economies of scale. It also creates hindrance in exports, he added. Traders’ leader Anser Zahoor Butt said the cumbersome government regulations make compliance too onerous for small firms. He conceded that tax evasion creates an unfair advantage for informal firms. But he as far as the government services on enterprise contribution or labour welfare go, those do not suit a family of six operating a machine on convenience of each family member. Moreover, he lamented programmes that target the informal sector and distort the playing field. In this regard, he cited the deduction of GST on electricity bills. He said factors inhibiting formalisation should be analysed and removed. He said it requires many years of training and abstract economic thinking to miss the obvious.
Market analyst Benish Toor said that the salient characteristic of modern production is that it mobilises a lot of knowhow – too much to fit in the head of any single person. She said efficient production requires a division of labour among those who know about technology, marketing, finance, logistics, human-resource management, contracts, regulations, distribution, customer service, and much more. Moreover, she added it requires manual and intellectual skills that must be used in tandem. Just think of the different specialised skills (many of them recognised by the Oscars) that must come together to make a single film.
She said the small firms must be persuaded to come under an integrated cooperative system where persons with different skills could be accommodated. This unification, she added could be in the form of cluster of related firms. She said this gives rise to another problem, as instead of operating from their homes the workers would have to travel to the production sites. She said daily commute times for low-income formal-sector workers averages three hours, and the average direct cost of transportation is equivalent to roughly two hours of work at the minimum wage. An eight-hour shift becomes an 11-hour shift for which net pay is only six hours. This, she added is the main reason for informality.