The International Labor Organization (ILO) found that Pakistan’s unemployment rate is 5.2 percent and India’s is 4.2 percent. But Kenny argues that developing countries’ low unemployment rates are misleading:
The majority of Pakistan’s and India’s populations work in small-scale farming or are “self employed” in informal microenterprises. That’s true across much of the developing world. The National Bureau of Economic Research’s Rafael La Porta and Andrei Shleifer suggest that, in the poorest countries, more than two-thirds of the labor force is working on the family farm or is in the informal sector.
Farms managed by the world’s poorest people tend to be small and inefficient—demanding a lot of labor for little output. That’s why families farming them make up the bulk of the world’s population living on less than $1.25 a day. The majority of enterprises run by the world’s poorest are shops and kiosks making a few sales a day—general stores, tailor shops, telephone booths, or fruit or vegetable businesses. In India, data collated by MIT’s Abhijit Banerjee and Esther Duflo suggest the average shop run by people living in poverty makes a profit of just $133 a year. That low productivity helps to explain why, even though only around 200 million people in the world are considered unemployed by the ILO, 1.3 billion workers lived in families below the $2-a-day poverty line.