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Mind the gap

Opinion

January 24, 2018

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In the early hours of the morning, hundreds of women of varying ages walk from Islamabad’s filth-ridden settlement of Mehrabadi to work as domestic helpers in the nearby houses and villas.

Sumera is among these women. Along with her two daughters, she works for more than 10 hours at various houses where she performs a multitude of tasks, such as sweeping the yard, cleaning marble floors, washing and ironing clothes and cooking food that domestic workers cannot afford. They do all this and much more for less than Rs9,000 per month. It would be unfair to consider this amount to be a wage as it is even less than a stipend that a volunteer receives. How can people climb out of poverty if they are paid such low wages?

Built on the backs of Sumera and other male and female workers like her, economic progress in Pakistan has only benefited a tiny minority that is affluent. Those with power and money are achieving unprecedented growth in their fortunes while the workers – especially women and those who work in informal sectors – struggle to survive. While one group is living the good life, the other is simply thriving without any access to the bare essentials of life. A majority of people are living on a paltry wage without any social protection and old-age benefits.

A recent Supreme Court hearing on the pension of a bank employee revealed that those who work in higher managerial positions are getting between Rs2 million and Rs3 million per month while a retired employee has been denied a pension of just Rs1,312 per month.

The inequality crisis across the world has spiralled out of control. Oxfam estimates that the richest one percent of society now has more wealth than the rest of the world combined. Last year, we saw the largest increase in the number of billionaires in history – a billionaire came into being after every two days. There are now 2,043 billionaires across the world. In the last 12 months, the wealth of this elite group has increased by $762 billion, out of which $404 billion went to Asian billionaires.

Around 79 percent of the wealth created in China and 73 percent of the wealth created in India went to the richest one percent of the population in these countries. Meanwhile, the bottom 50 percent of the population India and China only witnessed a one percent increase in their wealth.

Wealthy individuals and corporations are using power and privilege to skew the economic system and increase the gap between the haves and the have-nots. This is facilitated by a global network of tax havens and global value chains that drive down wages to maximise profits for the shareholders of big corporations.

From January 23 to January 26, the world’s billionaires, political elite and corporate leaders will gather in the Swiss resort town of Davos to reaffirm their belief in a broken global economic system through the rhetoric of inclusive development. Instead of creating an economy that works towards ensuring prosperity for all, the current neoliberal market-led model, powered by World Economic Forum members, has instead created an economy for the privileged one percent

An important reason for the huge concentration of wealth and incomes is the increasing return to capital as opposed to labour. This means workers are capturing fewer gains from growth. In contrast, the owners of capital have seen their fortunes grow consistently.

Another cause for the concentration of wealth in a few hands is linked to democratic failure. The stocks of the wealthy are adding to fortunes that they already have too much of. This wealth is, in turn, being used to change the rules of game and favour a few at the expense of the entire society. When wealth is used to influence politics, it undermines basic democratic principles. Instead of clamping down on the staggering levels of inequality, governments across the world are closing civic spaces and suppressing the voices of the people.

Given below are a few facts that show how the rich live as compared with the rest of Pakistan’s population and what the future holds for those at the bottom of the income ladder:

First, agricultural land remained a major source of economic and political power until the 1980s. However, two-thirds of rural households in Sindh and almost every second rural household in Punjab are landless today. Widespread disparity in the rural areas over land and the access to land has culminated in rural poverty and suffering. The privileged few control politics and policymaking and ensure that pro-poor ideas and schemes never get to the drawing board.

Second, the other reasons that have fuelled disparity are the low wages of workers and the infringement of labour rights. Minimum wage in Pakistan is a fraction of the living wage on which a family of four can live a decent life in urban centres, which is also not implemented. Data from the ILO indicates that over 37 percent of workers in the garment industry did not receive their minimum wage last year. The Asia Floor Wage Alliance has calculated a living wage of Rs31,197 for Pakistan in 2015. However, the minimum wage was only Rs13,000.

Third, the people living without land or surviving below the minimum wage in urban areas could have escaped poverty if there had been a progressive redistribution policy and adequate appropriate social spending. Under the neoliberal economic policy prescription – such as fiscal responsibility, deregulation and privatisation – social spending was drastically cut down and essential services were privatised. This affected none other than the people at the bottom tier and reduced their chances to climb out of poverty.

Lastly, Pakistan has consistently underperformed in mobilising potential tax revenue and the regressive nature of its tax system has posed a problem. It not only places an additional burden on the poor through indirect taxation, but also enables major economic sectors to find ways to escape direct taxation. This is especially prevalent in the agricultural and services sectors. Ultimately, the poor and middle class segments end up paying through consumption taxes. The limited fiscal space, with a low priority for human development, is diminishing opportunities for those who heavily rely on public services.

Tackling extreme inequality in Pakistan is going to require action on many fronts. The government, businesses and those who create wealth in Pakistan must build an inclusive and sustainable economy that provides decent jobs with fair living wages. They must also reduce gender-based employment and wage gaps; invest in healthcare and education; and increase the social protection expenditure. These public policy choices have worked worldwide and will also work in Pakistan once there is a strong political commitment from various political parties.

The government of Pakistan must set concrete, time-bound national targets and plans to reduce inequality among various segments of society. These targets should ensure that the collective income of the top 10 percent of society should be no more than the income of the bottom 40 percent. In addition, efforts ought to be made to produce national data on income and wealth, especially for the top 10 percent and one percent of society.

The writers work for OxfamInternational.

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