July 04, 2008
Pakistan’s Poverty Profile
Over the last eight years Pakistan has seen a huge change in its economy and level of development. But has that affected the poor? Has there been much change among the lowest income groups? Is poverty truly declining, or has the last eight years just been a party for the rich, the real estate speculators, and the stock market players?
To truly answer that question one has to look at real data. The evidence of one’s eyes on a trip to Pakistan is simply too unreliable. A traveler only sees what he sees, and frankly it is impossible to tell the difference between someone who is merely very poor and another who lives in poverty by what they look like on the street. To get at this question one has to go to the economic statistics and survey data collected by the government of Pakistan. When Musharraf was in power, these numbers were routinely dismissed by critics as “fabricated” by Musharraf. But the production of these numbers involves so many career civil servants and clerks, that it is difficult to imagine how anyone could carry out a total fabrication of official statistics without someone revealing the truth. And in fact, these were the professional products of government employees, not political operatives. Shaukat Aziz transferred power to a caretaker government in November 2007, and the PPP has been in power since the February elections. Nevertheless, no one has claimed that the statistics of the last few years were incorrect or politically manufactured, and the government released its Economic Survey of Pakistan in early June in which it embraced and accepted all the numbers that Musharraf has rightly crowed about.
The main point of this survey is that the plunge in poverty continues. Between 2000 and 2006 the number of people who were below the poverty line dropped from 34.4% of the population to 22.3% of the population. Even among those that were still below poverty, the severity of their poverty lessened, as the percent classified as “ultra-poor” and “extremely poor” dropped from 11.9% to 5.9% of the population. As these families ascended out of poverty, they gained the ability to afford basic health care and education for their children.
Now in Pakistan, the poverty line is set very low. It correlates with the international definition of about 1 dollar per day (1993 dollars) in consumption per person. In Pakistan, income above 1000 rupees per month per person means you are not in poverty. And income above 2000 rupees per month (or say 150,000 rupees annually for a household of 6) puts you in the top 20% of the population. The rich in Pakistan are not all that rich, it is still a very poor country.
In consumption terms, Pakistan has become slightly more unequal than it was in 2000. One way of looking at inequality is how much consumption goes to each 20% band of the income ladder. In 2000, the lowest 20% got 10.1% share of consumption, while the highest 20% got 38%. In 2006 those numbers were 9.6% and 40.3% respectively. So the wealthiest have benefited slightly more than the poorest, with the broad 60% in the middle holding their own. But remember, this is in the context of rapid growth and rising total consumption. Although the poorest saw their slice of the pie drop a fraction, the total pie grew very fast, so they did pretty well anyway. This reinforces the basic notion that the only really effective way of eliminating poverty is rapid economic growth, and rapid growth will always have the effect of reducing poverty. In fact, inequality in Pakistan is very low by Asian standards (and much lower than India or China), which is why Pakistan has no billionaires. I personally was rather amused at what constituted a “posh” area in Lahore or Islamabad when I visited last year.
The rapid growth has been marked by a huge rise in employment, in contrast to the relatively jobless growth that India has experienced. In 2001 the Annual Labor Force Survey found a total labor force of 42 million, of which 3.5 million were unemployed. By 2007, the survey found a labor force of 50 million, of which 2.5 million were unemployed. The number of employed Pakistanis surged from 38 to 47.6 million. Unemployment was a low 5.2%. There remain significant cultural barriers to female participation in the labor force, but among younger workers, female participation rates in the labor force rose from 10% to 18% in the last 7 years, and have hit 25% in Punjab, compared with a steady 70% rate for males.
While economic growth can raise incomes and consumption levels, what about the government’s responsibility for social services and human development? On this front too, there was major expansion in the last 8 years. Education spending went from 66 billion to 224 billion rupees, population planning from 1.3 to 13.3 billion, health spending from 19 to 62 billion, and water and sanitation from 5 to 17 billion rupees.
The effect of this spending has been substantial. Gross primary school enrollment rates rose from 72% to 91%, and middle school gross enrollment went from 41% to 51%. Literacy rose from 45% to 55% and has reached 67% for males. Soon we will no longer be able to refer to the average Pakistani as the “illiterate masses”.
In health, infant immunization coverage has risen from 53% to 76%. Life expectancy has reached 64 years for males and 66 for female, numbers equal to what life expectancy was in the United States in the 1930’s. However, infant mortality at 7% and under 5 years mortality at 10% remain atrociously high, even by Indian or Bangladeshi standards. Given that 4 million babies are born every year in Pakistan, that means 280,000 die in their first year, and another 120,000 die before reaching age five. Over the next ten years, almost 4 million Pakistani babies will die needlessly due to the shameful performance of many governments. By comparison, in Thailand only 2% of babies die before age 5.
All this data just begs the question: if things are going so swimmingly in Pakistan, why is the change not visible? On one level it is visible, it is just a matter of perspective. For a visitor returning for the first time in 20 years, the changes are everywhere you look. But for someone who is living there, a 5% change in annual living standards isn’t going to make much difference. Per capita income in the US is 20% higher than it was in the mid-1990’s, but it is very hard to see much difference in the average person’s life.
But on another level, there is some truth to that question. Despite 50 years of 5% growth, Pakistan remains a very poor country. That is because it has had to do the very hard slog of building the basic elements of a modern economy out of the subsistence agriculture that was all that existed before 1948. It takes just as much work to raise incomes from 300 dollars per year to 3,000, as it does to raise from 3,000 to 30,000.
We all know what developed economies “look” like. That obvious physical appearance (let us say the United States in the 1950’s) is reached at income levels of about 15,000 dollars. Pakistan has just reached 3,000, and is now ready to make a huge leap upward into a much more modern profile. It can reach 15,000 dollars in income with 6% per capita growth for 25 years or so. This is the primary task of the governments of the next two decades, to allow Pakistan to achieve that goal and thereby provide a decent life to all its citizens.
