Situation Analysis: Informal Sector Employment in Pakistan
Research conducted by PRIDE, utilizing microdata from the Labour Force Survey (LFS) 2020-21, highlights the immense scale of the informal economy in Pakistan. Covering approximately 100,000 households, this analysis aims to inform policy and address the barriers that informality poses to sustained national growth.
KEY FINDINGS (2020-21)
Distribution of Total Employment
The total workforce of 67.2 million is distributed across several key pillars of the economy. While agriculture remains the largest employer, the service and manufacturing sectors represent the bulk of urban and semi-urban livelihoods.
- Agriculture: 37.5% (25.2 million)
- Community/Social & Personal Services: 16% (10.8 million)
- Manufacturing: 14.9% (10 million)
- Wholesale & Retail Trade: 14.4% (9.7 million)
- Construction: 9.5% (6.4 million)
The Non-Agriculture Divide
When excluding agriculture, the workforce (42.1 million) shows a stark divide between formal and informal structures. 72.5% of these workers (30.5 million) operate in the informal sector, facing low wages and a lack of social protection.
Top Informal Sector Industries:
| Industry Division | Workers (Millions) | Sector Share |
|---|---|---|
| Wholesale & Retail Trade | 9.3 M | 30.6% |
| Manufacturing | 6.2 M | 20.2% |
| Construction | 6.0 M | 19.6% |
Occupational Clustering
More than 90% of informal workers are concentrated in just four major occupational groups. This clustering presents a unique opportunity for the government to design hybrid social protection programs by targeting these specific groups through institutions like EOBI and ESSI.
- Service and Sales Workers (30%): Dominated by sales workers (7.7M).
- Craft and Related Trades (26.5%): Including food processing, woodworking, and garment makers (3.7M).
- Elementary Occupations (21.6%): Primarily mining, construction, and manufacturing laborers (5.0M).
- Plant & Machine Operators (11.9%): Largely consisting of drivers and mobile plant operators (3.0M).
APPENDIX: Detailed Occupation Breakdown
Informal Sector Employed (Aged 10+), 2020-21
| Occupational Group / Sub-Major Group | Number | Percentage |
|---|---|---|
| Managers (Total) | 675,630 | 100.00% |
| - Hospitality, Retail & Services Managers | 393,759 | 58.25% |
| - Production & Specialised Services Managers | 250,903 | 37.14% |
| Professionals (Total) | 997,535 | 100.00% |
| - Teaching Professionals | 471,751 | 47.29% |
| - Legal, Social & Cultural Professionals | 383,577 | 38.45% |
| Technicians & Associate Professionals | 1,184,347 | 100.00% |
| - Business & Administration Associates | 759,263 | 64.11% |
| Service and Sales Workers | 9,154,879 | 100.00% |
| - Sales Workers | 7,714,309 | 84.26% |
| - Personal Service Workers | 1,325,936 | 14.48% |
| Craft and Related Trades Workers | 8,089,014 | 100.00% |
| - Food, Wood, Garment & Craft Workers | 3,749,351 | 46.35% |
| - Building & Related Trades | 1,654,010 | 20.45% |
| Plant & Machine Operators | 3,629,872 | 100.00% |
| - Drivers & Mobile Plant Operators | 3,049,135 | 84.00% |
| Elementary Occupations | 6,582,284 | 100.00% |
| - Mining, Construction & Manufacturing Labour | 5,082,710 | 77.22% |
| - Cleaners and Helpers | 693,976 | 10.54% |
| GRAND TOTAL (INFORMAL SECTOR) | 30,489,286 | 100.00% |
Source: Pakistan Bureau of Statistics (PBS), Labour Force Survey 2020-21. Analysis by PRIDE.
Disclaimer: Internal funding by PRIDE. No external or local funding received.