Skills acquisition and the significance of informal training system in Pakistan: Some policy implications

RECOUP Policy Brief No. 7
by Shehryar Janjua and Arif Naveed

Whilst the informal sector is a major provider of skills for the bulk of Pakistan’s labour force, its crucial role has largely been overlooked in policy making. There is a need to undertake effective interventions in the informal training system to enhance the quality of skills and incomes of its participants, and thereby improve the employment prospects of a majority of the country’s labour force. The formal Technical Education and Vocational Training (TVET) system in Pakistan, as it currently exists, is inaccessible to individuals without basic education. Entry criteria demand a minimum of 8, and usually 10, years of schooling for most training programmes. This sharply contrasts with educational attainments of the country’s labour force. One-third of the labour force (15 years and above) is illiterate, and 46.2 per cent have even less than a year of education (GOP 2007). Only 35 per cent of the labour force has education of middle school (grade eight or above, and the percentage of the labour force with education of matric (grade 10) or above is as low as 23.5 per cent (op.cit). Among those who have gained skills from the formal TVET system, 90 per cent have education above middle school, whereas 58 per cent of skilled individuals (in the formal as well as informal systems) with education of matric and above benefit from the government’s training facilities (MHHDC/RECOUP, 2007). Furthermore, formal training involves significant expenditures and the average private cost of gaining skills through vocational and technical institutions is Rs. 11,153 (Rs. 19,951 for males) (op.cit). As can be inferred from these statistics, the formal TVET system is non-inclusive and marginalizes almost two-thirds of the labour force that cannot fulfill entry requirements. As it presently stands, the TVET system is heavily biased towards the more educated, urban and relatively well-off, and overlooks the skill needs of less educated, rural and poor.

On the other hand, the informal sector in Pakistan serves as the predominant provider of skills as well as employment to the labour force. Out of  non-agricultural employment, as much as 78.8 per cent of youth (ages 15-24) and 68.4 per cent of those aged 25 or above are employed in the
informal sector (GOP, 2008). Moreover, there has been an increase of 4 per cent in youth and 7 per cent in those aged 25 or above employed in the informal sector over the period 1999/2000 to 2006/07 (ibid.).

The most prevalent mode of skills acquisition in the informal sector is apprenticeship under the ustad-shagird (master-apprentice) system. A household survey suggests that the percentage of those acquiring skills from the informal sector through apprenticeship is twice the proportion of those who acquire skills in the formal TVET system (MHHDC/RECOUP, 2007). The system is well suited to the needs of poor families in the sense that apprentices are provided small grants/wages during training. In addition, informal skill acquisition is important for a large number of individuals informally engaged with formal enterprises.

The informal sector covers a broad set of businesses, ranging from the relatively traditional to modern, and includes thriving enterprises along with subsistence-level activities. However, by and large, the sector is characterized by low-end businesses. It has been contended in the literature that a basic problem of the informal sector is its poor technological and skill bases, which translate into low productivity and concomitantly low wages. Furthermore, there is an almost complete neglect of the sector by public as well as private formal support systems.

Findings from an ongoing qualitative study carried out by MHHDC – RECOUP reveal that entrants to the informal training system are typically poor. They are also likely to have dropped out after some years of schooling. In general, owing to the impact of both the direct and the opportunity costs of education, such children are enrolled in informal businesses as apprentices at an early age. Here, the methods, skills and technologies employed are often out-dated. Upon completing training, participants in the system often continue for a few years as wage employees, and ultimately establish their own businesses. The entire process, from training to wage employment and ultimately self employment is scarcely touched by any form of institutional
support. There are no noteworthy financial or business development services (credit, business counseling, technological support, entrepreneurial guidance etc.) that cater to the particular realities and problems of the informal sector. By definition, individuals engaged in the informal sector do not have any certification for their skills, and are thus generally excluded from formal retraining and employment opportunities. There is thus a strong dichotomy among formal and informal training systems, as well as employment, with little possibilities of inter-sectoral mobility.

It emerges from the previous discussion that the formal training system excludes a great proportion of the country’s labour force, both because of educational and monetary requirements. At the same time, the formal training system lacks adequate capacity given its small annual inductions in comparison to the number of new entrants into the labour force every year in Pakistan.  It is thus apparent that any effective and well-grounded skills development strategy should take cognizance of the informal sector in Pakistan, and identify areas for appropriate interventions in this sector.
Policy recommendations
On the basis of the discussion above there is a need for the following policy interventions:

  1. A phased increase in the formal TVET programmes, to include some of those with less than middle school education, in-line with demonstrable market needs. Given the link between poverty and low educational attainments, it is necessary that such programmes be free for the economically underprivileged.
  2. Enhancement, initially on a pilot basis, of skills in the informal sector through rigorous training of master-craftsmen (ustad). Moreover, special training courses (e.g. fast track evening courses), as pilot projects, can be designed to enhance the skills of participants in the informal sector by providing them formal training using the existing TVET infrastructure.
  3. At present, there is no recognition of prior learning (RPL) system in existence in Pakistan. Operationalizing such a scheme (by enumerating various skills prevalent in the market, standardizing their curriculum, testing and certifying) would allow individuals to gain accreditation for their skills and access formal retraining opportunities, acquire formal employment, or work overseas in more high-paying economies. The cost of such a scheme can be partially borne by individuals acquiring certification therein.
  4. Launching large scale community-based training programmes, using the model of ILO’s “Training for Rural Economic Empowerment (TREE)” pilot project. The TREE model, successfully tested in Pakistan, emphasizes the provision of demand-driven, tailor-made training courses as well as post-training services (i.e. microfinance and other business development services).
  5. Since the informal sector uses on-the-job training systems, providing business development services (including access to financial capital, technology upgrading and business counseling) to these enterprises can greatly enhance the quality of skills imparted.
  6. Building a database of existing types of skills provided in the informal sector and their cataloguing/categorization would allow for effective planning and policy making.
  7. Skills training should be promoted through distance learning schemes. Currently the Allama Iqbal Open University offers several short term skills programmes (through distance learning, its regional campuses and affiliated institutions). There is a need to strengthen such programmes.
  8. There is a need to provide institutional support to the informal training system. For this purpose, it would perhaps be most efficient to expand the mandate, and utilize the facilities, of existing government bodies. Such an arrangement can also help in espousing formal-informal sector linkages. However, there is a need to maintain a specialized focus on the informal sector given that its dynamics are qualitatively different from its formal counterpart.

Aftab, K. & Rahim, E. (1989). Barriers to the Growth of Informal Sector Firms: A Case Study. Journal of Development Studies, 25(4).

Aftab, K. (2006). Employment Creation in Pakistan’s Informal Industrial Sector: Constraints and Potential. In Pakistan: Decent Employment Generation and Skills Development. MoL/ILO, Islamabad.

Amjad, R. (2006). Employment Strategies and Labour Market Policies: Interlinkages with Macro and Sectoral Policies. In Pakistan: Decent Employment Generation and Skills Development. MoL/ILO, Islamabad.

Chaudry, M.A., Azim, P. & Burki, A.A. (1989). Skill Generation and Entrepreneurship Development under Ostad-Shagird System in Pakistan. Friedrich Ebert Stiftung, Islamabad.

Ghayur, S. (ed.) (1993). The Informal Sector of Pakistan: Problems and Policies. Friedrich Ebert Stiftung, Islamabad

Ghayur, S. 1997. Human Resource Development and Utilisation in Pakistan. Friedrich Ebert Stiftung, Islamabad.

GOP (Government of Pakistan). (2007). Pakistan Employment Trends 2007: Youth. Ministry of Labour, Manpower & Overseas Pakistanis, Labour Market Information and Analysis Unit, Islamabad.

GOP (Government of Pakistan). (2008). Pakistan Employment Trends 2008: Youth. Ministry of Labour, Manpower & Overseas Pakistanis, Labour Market Information and Analysis Unit, Islamabad.

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One Response

  1. In Delta State of Nigeria the Skills Acquisition centres are about six very wel equipped and functional, located all round the state of 25 Local Government, with three senatorial districts.
    The Directorate of Youth Development manages and oversees the functions of these vocational skills acquisition centres.
    The Hon Commissioner of this youth directorate is Mr EBIFA IJOMAH who has spearheaded a reform to make the centres upgrade the training output with aview to making them offer professional certification to the young students graduating from them;the aim is to train for self-actualisation and empowerment for sustainability which promotes job creation oppportunitity and self-employment possibilities when they graduate.
    Because starter packs are also offered by the state government of Delta State this reform which is fully supported by the Executive Governor of Delta State,Dr Emmanuel Eweta Uduaghan,a proponent of Human capital Development,as part of his three-point agenda,the graduates will prove worthy by generating income as well as opening doors to other youths who they now can employ in their enterprises.
    The need for collaboration with foreign based institutions with similar objectives is also being explored to facilitate the certification and professional best practice status for all the graduates.
    In fact to crown it all,the Commissioner Mr Ebifa Ijomah hopes to create an Alumni body to properly focus and document the graduates of the skills acquisition centres in Delta State.Any foreign certified institution that can meet the criteria for obtaining high standards of professionalism in vocational training for the youths will be welcome.

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