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A widening economic divide: What are the remedies?

Pakistan is a country where up to 40 percent of its over 207 million population lives below poverty line — less than $1 a day or less. Despite tall claims by the officials about putting the economy on the progressing track, it is undeniable fact that, economic divide in the country would widen in the coming days as dependence on foreign loans hurting the economy and ultimately pushing more and more people below the poverty line, while the country’s ballooning external debt and liabilities continue to burden its economy.

The economic inequality in Pakistan has grown even though consumption based poverty has dropped from 57.9 percent to 29.5percent between 1998-99 and 2013-14, and multidimensional poverty, which includes health, education and living standards has fallen from 55.2 percent to 38.8 percent between 2004-5 and 2014-15.

According to a United Nations Development Program (UNDP) report of July 2016. The report says that in 1987-88, the Gini coefficient, which measures income inequality, was 0.35 and that this number has risen to 0.41 in 2013-14. Because of this inequality, the report says, economic growth is affected, crimes increase, talent is wasted, and social mobility is hindered. Therefore, the most critical challenge of the 21st Century is achieving the Sustainable Development Goals, which includes ending poverty in all its forms and leaving no one behind. According to the report, one of the world’s great achievements in the past few decades is the significant fall in global poverty. Between 1990 and 2012, the number of people living with $1.90 a day has fallen by more than a billion. However, despite this, income inequality has increased within and across the countries.

According to the World Bank, the Gini coefficient for Pakistan has fallen. Spatial inequalities, however, plague Pakistan too and a report by the UN titled ‘Multidimensional Poverty in Pakistan’ for 2014-15, states that although poverty in urban areas of Sindh stands at 10.6 percent an alarming 75.5 percent of rural areas in the province are mired by poverty. Similarly, although Punjab has accounted for the highest reduction in poverty but districts in southern Punjab remain starkly poor.

There are multiple factors pushing people below poverty line in Pakistan. Unemployment is a major factor. With an unemployment rate up to 10 percent, unemployed youth continues to experience the pangs of poverty for they are unable to meet basic needs of life. Unemployment is rampant not only among the unskilled labor but also among the educated youth, many of them with professional skills. The unemployment rate in Pakistan has surged at a time when major portion of the population belongs to the working age. The country’s technical vocational education and training system lacks meaningful participation of stakeholders, and not geared to meet the market needs. Due to shortage of skilled labor and necessary equipment, local industry is finding it hard to adapt to the demands of the work force mobility, particularly in the implementation of innovative processes. The existing training institutions are not capable of imparting and developing skills required for competitiveness, productivity and employment. There is a need to standardize training, raise its social perception, make it available to marginalized sections of the society and improve the mechanisms for its delivery.

Investment in human capital formation means investment in education and health sectors. Human development provides a wide range of choices and opportunities to the people for employment, nutrition, education and health care. Sustainable growth and poverty reduction objectives are concomitantly linked to significant investment in human capital.

Pakistan is yet to make significant attainments in the human development index (HDI), which focuses on measurable dimensions of human development such as living a long and healthy life, being educated and having a decent standard of living. Thus, HDI combines measures of life expectancy, school enrolment, literacy, and income. In the country’s rural areas, the health status is relatively poor.

Most of third world countries have started health insurance programs on the recommendation of the World Health Organization (WHO). About 55 per cent of Pakistanis earn less than $2 a day and the present government has decided to provide health insurance cover to all such people in phases and the data of the Benazir Income Support Program will be used for the purpose. Last year, former Prime Minister Nawaz Sharif launched health insurance scheme for the people in different parts of the country including Islamabad, Quetta, Gilgit Baltistan Muzaffarabad, Rahim Yar Khan, Narowal, Khanewal and Sargodha. The scheme had been launched in 15 districts of Islamabad in the first phase and will be expanded to 23 districts in the second phase. Around 1.2 million families will get free healthcare facilities in the first phase. The people of Sindh and Khyber Pakhtunkhwa will, however, not benefit from the initiative because their governments have declined to become part of the federal government program. The wider coverage of poor sections of society under health insurance scheme will be a great step towards making the country a welfare state. Under the scheme, people living below the poverty line would be able to get best possible treatment at government’s expense. Under the program, the treatment of cancer, heart disease accidents, burns and other chronic disorders will be insured under the priority diseases category.

The urban- rural divide in the country also creates inequality of opportunities with the poor in rural areas having little access to education, health and financial services. Policies should be designed to focus on broadening the coverage of social spending, to achieve efficiency and equity. Efforts should be made to enhance the coverage of financial services to the bottom 40 percent of the population. The government should provide legal protection to the workers in order to ensure job security and flexibility.

Poverty should be more comprehensively measured through an index that uses multiple indicators. These may be broadly categorized as socioeconomic and demographic indicators related to income and wealth, housing, transport and communication, education, health and gender equality. The government must take steps for supporting the poor and reducing their vulnerability. The government should also create conditions for the development of insurance markets, encourage the use of other risk-spreading financial instruments and design economic and regulatory incentives for risk reduction behavior.

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