UNIVERSTY OF EDUCATION

Effect of Child Labor on the Economics of Pakistan

Submitted to: Miss Tahira Nisar Submitted by: Hassan Farooq Muhammed Nouman Khan Muhammed Awais Naveed Iqbal Muhammad Rasheed
Syed Salman Haider Malik Aqib Introduction

BBA-F-09-232 BBA-f-09-235 BBA-f-09-229 BBA-F-09-243 BBA-F-09-236

Effect of Child Labor on the Economics of Pakistan

The term child labour' is used for employment below a certain age, which is considered illegal by law and customs.(Basu, kaushik and hoang,1998) United Nations International Childrens Emergency Fund (UNICEF) define child as anyone below the age of 18, OR child Labour as some type of work performed by children below age 18. (UNICEF) In this paper we try to identify the reasons of child labor and how we eliminate the effect of child labor on economy of Pakistan. We try to identify some reasons which are follows: high illiteracy rate in rural area, imperfect of financial market, lack of knowing labor laws in Pakistan, agency issues, lack of technology, lack of parental education Or high illiteracy rate in adults, gender problem in Pakistan family culture, fault of education system, low understanding of social achievement. All researchers and practitioners agree that poverty is the main determinant of child labour supply, and that child labour significantly increases the income and the probability of survival of the family. Several estimates exist of the proportion in which children contribute to family income. Cartwright and Patrinos (1999) The ILO (2002) estimates that about 210 million children between the ages of 5 and 14 were working in 2000, about half of them working full-time. That implies that approximately ten percent of the worlds children were working full-time. At the same time, UNESCO estimates that about one of every five primary school-aged children was not enrolled in school. The absolute numbers of children working are largest in Asia, but the incidence of child labor seems to be highest in Africa (Udry, June 2003) Child Labour is an important and a serious global issue through which all and sundry countries of the world are directly or indirectly affected, but, it is very common in Latin America, Africa and Asia. According to some, in several Asian countries 1/10 manpower consists of child Labour. In India the number of children between the ages of 10-14 has crossed above 44 million, in Pakistan this number is from 8 to 10 million, in Bangladesh 8-12 million, in Brazil 7 million, whereas their number is 12 million in Nigeria. (Arshad, 2011) An individual who is under the age of 18 years based on the United Nations Convention on the Rights of the Child, 1989 and the ILO Convention on the Worst Forms of Child Labour (ILO No. 182), 1999. The concept of child labour is based on the ILO Minimum Age Convention (No. 138), 1973 which represents the most comprehensive international definition of minimum age for admission to employment or work, implying economic activity. Therefore, child labour consists of all children under 15 years of age who are economically active excluding (i) those who are under five years old and (ii) those between 12-14 years old who spend less than 14 hours a week on their jobs, unless their activities or occupations are hazardous by nature or circumstances. Added to this are 15-17 years old children in the worst forms of child labour. Child labour slated for abolition falls into three categories.
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Effect of Child Labor on the Economics of Pakistan

As of 2008, 17.2% of the total population lives below the poverty line, which is the lowest figure in the history of Pakistan. Poverty levels in Pakistan appear to necessitate that children work in order to allow families to reach their target takehome pay. On the side of the firms, the low cost of child labor gave manufacturers a significant advantage in the Western marketplace, where they undersell their competitors from countries prohibiting child labor, often by improbable amounts. Child labor is overwhelmingly a rural and agricultural phenomenon. For example, in Pakistan, 70% of working children are employed in agriculture (Pakistan FBS, 1996). Boys are more likely to work than girls, and older children are much more likely to be employed than their younger siblings (Grootaert and Patrinos, 1999).

Problem Statement:
Why and how Child labor influence the economy of Pakistan

Objectives of study:
In this paper we try to identify the reasons of child labor and how we eliminate the effect of child labor on economy of Pakistan. We try to identify some reasons which are follows: high illiteracy rate in rural area, imperfect of financial market, lack of knowing labor laws in Pakistan, agency issues, lack of technology, lack of parental education Or high illiteracy rate in adults, gender problem in Pakistan family culture, fault of education system, low understanding of social achievement. After this project we try to understand which the reasons due to these child labor is increasing and effecting the economy of Pakistan. We try to identify the problems which are the base of effecting economy of Pakistan and also the reasons, factors behind child labor.

Significance of study:
Sources of data on child labor are increasing almost daily, and with them, our understanding of child labor should continue to increase accordingly. Unfortunately, it does not appear that much work is being done to validate the types of surveys and data collection methods that are being used extensively. Hence, there is considerable scope for work on how to measure the activities in which children participate. Many early studies of child labor relied on cross-country data. Cross-country estimates of economic active populations come from the ILO's LABORSTA database although the most recent release (fifth edition) omits the 10-14 age groups. (http://laborsta.ilo.org/. The fourth edition data (used herein) is available from UNSTAT as well.)

Effect of Child Labor on the Economics of Pakistan

These LABORSTA estimates of economically activity populations are generally believed to understate the extent of work, because data on work inside the household (even market work) are often not collected Moreover, although the LABORSTA data are available over time, very few low-income countries have multiple data sources on child labor over time. Much of the intertemporal variation in child labor in the LABORSTA data must thus be driven by the imputations and adjustments done for LABORSTA rather than independent observations on child labor. As a result, the LABORSTA data is not reliably useful for analyzing changes in child labor over time. When the ILO's Statistical Information and Monitoring Program on Child Labor (SIMPOC) computes global estimates of the incidence of child labor, it does not rely on the LABORSTA data. Instead, it works wherever possible off available household surveys that facilitate a more complete picture of how children work and are free from LABORSTA's imputations. Understanding Children's Work (UCW) is a joint effort of the World Bank, UNICEF, and the ILO to coordinate studies relevant to child labor, and they maintain a thorough listing of labor force, child labor, and multi-purpose household surveys with information useful for studying how and why children work. Many dedicated child labor surveys assisted by SIMPOC are freely available for download from their website, and there are a variety of multipurpose household surveys that can be downloaded for research purposes.

Limitation & Delimitation:

Several issues arise in using household survey data to examine child labor supply. First, there is the general question about who to ask about the child's labor supply. A great deal of attention has been directed by agencies such as SIMPOC and UCW towards what types of activities should be monitored, but it is difficult to find detailed analysis of how this information should be collected. It seems likely that measurement error in hours worked is a first order problem with this data while participation is perhaps less difficult to gauge. Second, measurement of compensation is particularly complicated. Most children do not work for wages, so strong modeling assumptions are required even in detailed data to gauge their compensation. Moreover, it is not obvious that even in wage work any one respondent will be fully aware of the child's compensation. For example, a parent may be paid an amount that the child is not aware of for the child's services, but an employer may also compensate the child to reduce moral hazard problems. Third, estimates of the incidence of any type of work will be sensitive to the recall period used. It is not unusual for children to work intermittently, and it is not obvious what the "right" recall period is for any analysis. For example, in agricultural communities, one often observes high participation rates in market work during harvest seasons but little other than domestic work at other times of year. Systematic evidence on the dynamics of child labor is extremely rare. Levison et al (2003) is an exception. Brazil's urban, monthly employment survey follows approximately 35,000 household for fourth months (the survey is set up as a rotating panel).
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Effect of Child Labor on the Economics of Pakistan

Levison et al use this data to document the intermittent nature of market work participation in urban Brazil from 1982-1999. In their sample, they observe that the percent of children employed in any given month is roughly half the number of children employed in at least one of the four months. Moreover, depending on the city, between 20 and 40 percent of children 10-14 experienced 2 or more employment transitions in a four month period. Hence, child labor measures are sensitive to both the types of work considered and the recall periods used to assess employment status. This intermittency of employment raises particular problems for child labor measures based on the intensity of the child's work. Fourth, some of the most vulnerable children may be impossible to capture with surveys. Either they do not reside in households or their situation is sufficiently rare that the probability that they are sampled in a randomized survey is effectively zero. Moreover, there is often little reason to assume that selection into these activities (relative to other more easily measured forms of work) is random. To get at these rare or hard to find groups of children, researchers often employ contaminated sampling procedures, but it is hard to draw inferences with this data when children outside of the activity are unobserved. This is an active avenue of research (Edmonds 2006c).

Literature Review
Patterns of child labor:
There are certain well-established empirical regularities about child labor that should inform our discussion. First, it is clear that child labor overwhelmingly reflects the poverty of the households in which the children live. Fallon and Tzannatos (1998) review a variety of studies that indicate a strongly negative relationship between the incidence of child labor and household income, but note that this relationship is less marked in more affluent developing countries. Ray (2000) finds a strong negative correlation between household income and child labor, and a positive relationship between household income and school enrollment in Pakistan, but no such relationship in Peru.

The very common practice in the countryside area or in villages mostly is Bonded Child labor. A child has to pay for his father who had taken the loan and unable to pay it off. Child has to work like slaves against the repayment of the loan taken. Child labor is overwhelmingly a rural and agricultural phenomenon. For example, in Pakistan, 70% of
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Effect of Child Labor on the Economics of Pakistan

working children are employed in agriculture (Pakistan FBS, 1996). Boys are more likely to work than girls, and older children are much more likely to be employed than their younger siblings (Grootaert and Patrinos, 1999). On the other side there are also such parents who think education not really necessary for their children and they put their children in their well-established business at a very quiet young age. According to International Labor Organization if all children get proper education then world income would be increased by 22% approximately over 20 years. Elimination of childhood labor help in boosting the economy of country As long as children are put to work, poverty will spread and standards of living will continue to decline. ILO (2002) It is important to note that the strong empirical evidence that child labor declines and school enrollment increases with household income does not imply that increases in wages necessarily reduce child labor. Wages of adults and children tend to move together, and an increase in child wages induces a substitution effect that tends to increase the incidence of child labor. This substitution effect, if sufficiently strong, could outweigh the effect of increasing real income. For example, Kruger (2002) shows that child labor increases and school attendance decreases as coffee prices increase in Brazil. In contrast, Edmonds and Pavcnik (2002) show that in Vietnam, increases in rice prices were strongly associated with declines in child labor. It is also clear that child labor has important detrimental effects on schooling attainment and thus on the future income of children. As already noted, not all work by children has this effect. Ideally, such benign work by children (occasional light work on the family farm, or limited household work) is excluded from data collection on child labor. An important question to resolve is the extent of work by children that does have the consequence of interfering with schooling and thus future earnings. How many of the ILOs 210 million working children are sacrificing their education? This is inherently a difficult question to answer, because child labor and school enrollment are chosen simultaneously, complicating any causal interpretation of correlations that can be observed. However, the existing evidence is strong. For example, Psacharopoulos (1997) shows much lower educational attainment by children who work in Venezuela and Boliva. Using a very different methodology, Boozer and Suri (2001) find similar results for child labor and school attendance in Ghana. Households that are very poor are much more likely to send their children to work, and child labor contributes to poverty in the next generation by reducing schooling attainment. This circular pattern of positive feedback between poverty and child labor may lead to a vicious cycle of poverty, in which the descendants of the poor remain poor because they were poorly educated. This cycle can be the foundation of a classical poverty trap.

Imperfect financial markets, child labor and investment in human capital

The costs of additional child labor are the lower wages that the child receives when she grows up less well-educated because she worked as a child. These costs are realized in the far future, so for
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Effect of Child Labor on the Economics of Pakistan

cost-benefit analysis we calculate the present discounted value of these costs. For a given absolute cost, a higher interest rate implies a lower present discounted value of the cost. The benefit of child labor is the current wage earned by the child (and the reduced cost of schooling). These benefits are realized immediately, so no discounting is required. From a social point of view, it is efficient to increase child labor and reduce schooling up to the point at which the present discounted value of future costs of additional child labor are just balanced by the current benefit to the household of that additional child labor. It need not be the case that the socially efficient level of child labor is zero; this will depend upon the productivity of child labor, the degree to which schooling improves future productivity, and the interest rate at which future earnings are discounted. If financial markets operate smoothly and there are no issues of agency, this is precisely the calculus that will guide the decisions of parents as they make decisions regarding work and school for their children. Even if parents are poor, perfect credit markets permit them to borrow to finance the education their children, confident in their ability to repay the loan out of the increased earnings of their well-educated adult children. These private decisions will be socially optimal. (Christopher Udry Yale University June 2003)

Labor Laws in Pakistan:

The EoCA 1991 specifies the minimum age for work and also specifies the particular occupations and processes where children cannot be employed. For instance the Factories Act 1934 (amended 1997) applied only to Factories, where a factory is defined as a premises where at least 10 or more workers work on a manufacturing process. Similarly, in Pakistan, these labor laws did not apply to the establishments in the un-organized sector of the economy (Grimsrud 2002). The EoCA 1991 specifies the minimum age for work and also specifies the particular occupations and processes where children cannot be employed.As such it is applicable and enforceable even in the un-organized and informal sector, and to establishments that do not come under the definition of a factory. The EoCA 1991 is also considered more comprehensive because in terms of penalizing the offenders, that are the employers, it is more severe than the other minimum age laws. For instance, the maximum penalty in case of a contravention of the Factories Act (1997) in terms of

Effect of Child Labor on the Economics of Pakistan

employing an underage child for work is only Rs.500; whereas, under the EoCA 1991 the penalty can extend to imprisonment for up to a year or a fine of Rs.20000 or both. (Tazeen Fasih the World Bank Human Development Network Education Team November 2007) Laws and Legislations in Pakistan restricting employment of children Act/Law Minimum work age for Occupations Any occupation, but applies only to pledging of labor of a child in return for payment or benefit received by the parent or guardian Special provisions Allows children to work in return for regular and reasonable wages

Children (pledging 15 years of labor) Act 1933

Mines Act 1923

15 years and a child Work in mines and for age 15-17 considered children even the as a young person presence of children in parts of mines that are underground

A young person can work in a mine only if he/she has a certificate of fitness from a medical practitioner

Factories Act 1934

15 years for a child Any kind of work in Allows work if the and a person age 15- factories child/adolescent can 17 years is considered get a certificate of an adolescent fitness for work by a certified medical practitioner. A child cannot work more than 7 hours a day and after 7p.m or before 6a.m

Effect of Child Labor on the Economics of Pakistan

Shops and Establishments Ordinance 1969

14 years

Work in shops and establishments (where the term establishments encompasses a wide range of businesses, firms and commercial establishments)

Employment of Children Act (1938) 1991

14 years and person age 1518 is considered an adolescent

Work in or near railway lines and station, on ports and in a wide range of production processes which can be deemed harmful for the health of a child and include work with chemicals and weaving etc. However, it does not include any establishment where work is done by the family members (household enterprise).

A child can work on a family establishment or a school recognized by the government, if s/he or parents/guardians seek work for him/her, only if a medical practitioner gives a certificate of fitness and certifies that the child has attained 12 years of age (or 14 years in case of adolescents).The child cannot workfor more than a period of 3 hours without a break of at least 1 hour, and the hours of work with the intervals cannot exceed 7 hours a day. Also no child is allowed to work between 7p.m to 8a.m

Effect of Child Labor on the Economics of Pakistan

Source: Shafi, M and P. Shafi (2000) Legal Standards to Protect Children from harmful Work Around the world, most nations child labor laws:

Set 14 or 15 as the minimum age for work Prohibit children under 18 from doing hazardous work ILO Convention 138 Sets minimum age of 15 for employment ILO Convention 182 Prohibits the worst forms of child labor and requires countries to act toward eliminating worst forms UN Convention on the Rights of the Child Guarantees children rights to protection from economic exploitation and hazardous work, and access to health care and education

Unfortunately, existing laws and international standards are often violated Many countries and states: Lack effective laws to protect children. Include exemptions that make laws

unenforceable or only cover children in certain industries. Rarely enforce existing laws on child labor, or are under pressure from employers or local governments not to enforce laws. Lack funds or trained personnel to enforce laws

Agency:
Decisions regarding child labor and schooling are generally made by parents. This raises issues of agency, because decisions are being made by individuals who do not necessarily themselves experience the full implications of these decisions.
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Effect of Child Labor on the Economics of Pakistan

Even if parents are altruistic towards their children and surely this is the case for the vast majority of families issues of bargaining and negotiation within households, and the difficulty of making commitments that bind over generations may make it difficult to achieve optimally low levels of child labor. First, consider a case in which agency causes no deviation from the socially efficient levels of child labor and schooling, in the spirit of the classic rotten kid theorem of Becker (1974). Suppose that the parent feels altruistic towards the child, in the sense that the parents welfare increases when the childs welfare increases, and that the parent has access to perfect financial markets. In addition, suppose that the parent expects to leave a positive bequest to the child. In this case, the parent will choose to set the level of child labor to the socially optimum level, as described in section 3. The argument is quite simple: the parent would like to help the child achieve a particular level of welfare, and the parent has two instruments available to do so: the parent chooses the amount of child labor (and thus determines the level of schooling for the child), and the parent can give the child a bequest. The parent will choose the minimal cost means of achieving any given level of child welfare; to do otherwise would waste resources that could be used to achieve higher welfare for the child, the parent, or both. If the parent chose a level of child labor greater than is socially optimal, he would be wasting resources. He could reduce child labor a bit, reduce the future bequest left to the child to compensate, and have money left over to increase everyones welfare. Therefore, a parent who cares about the welfare of his child and who plans to leave a positive bequest to that child would ensure that the childs labor force participation matches the socially efficient level. However, suppose that the parent plans to leave no bequest. This is mostly likely to occur in a poor family, most particularly in a family in which the parents generation is especially poor relative to future generations. Child labor in this circumstance will be inefficiently high and schooling attainment too low, because once bequests have been reduced to zero this is the only instrument available to the parents to transfer resources from the next generation to support current welfare (Baland and Robinson (2000)). A potential way to reduce child labor would be for the parent to borrow to finance current consumption, with the child committing herself to pay back the loan from her future higher earnings. However, such intergenerational contracts are not enforceable. (Tazeen Fasih the World Bank Human Development Network Education Team November 2007)

Relationship of school and work to other variables

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Effect of Child Labor on the Economics of Pakistan

Another sense in which work and school can be thought of as competing activities has to do with their associations with other factors. This shows up particularly in studies employing a simultaneous equations strategy to disentangle the school/work nexus. This yields coefficients that show the effect of social and economic variables on work and also on schooling. If they have opposite signs, so that factors that promote schooling also discourage work and vice versa, there may be said to be a trade-off between these two activities. The roster of studies that have yielded evidence of this sort is very long, and all that can be done here is to briefly list them and describe their key findings: Admassie (2002), rural Pakistan: A wide range of variables predict school attendance; nearly all are inversely related to child labor in a model that permits joint choice of work, school, work and school or neither. An example is the adoption of more mechanized agricultural methods, controlling for household wealth. Tzannatos (2003), Thailand: Greater parental education increases schooling, decreases child labor. variables and parental education have opposite effects on school attendance and child labour. Canagarajah and Nielsen (1999), review of studies in five African countries: Parental education significantly increases schooling and decreases child labour in four of the five. Most other variables that positively affect one negatively affect the other. Emerson and Souza (2007), Brazil: The object of study was the differential effect of household factors on school and work outcomes for boys and girls. Bivariate probit models were estimated separately by gender; with nine explanatory variables there were 18 possible pairs of effects (on school and work). In 11 instances a variables coefficients were statistically significant in both the school and work equation, and in 10 of these they were oppositely signed. Kruger et al. (2007), Brazil: Parental wages and household wealth have opposite effects on school attendance and child labour. Dammert (2007), rural Peru: Reduced coca production, by lowering parental incomes, induces greater child labour but has no effect on education.

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Effect of Child Labor on the Economics of Pakistan

Cockburn (2001), rural Ethiopia: Parental education and most household assets increase childrens school attendance and reduce child labour. Bando et al. (2005), Mexico: Parental education increases the probability of school attendance and reduces that of child labour. Hsin (2005), rural Indonesia: Parental education positively affects school attendance, negative affects child labour. Rosati and Rossi (2003), Nicaragua and Pakistan: In a model with four work/school options, comparing only the work-only and school-only outcomes yields opposite signs on most variables in both countries, including parental education. Saucedo et al. (2004), Mexico: Parental education negatively predicts every outcome other than school-only, but there is no corresponding pattern to other explanatory variables. Deb and Rosati (2004), Ghana and rural India: Most variables in both countries, including parental education, have opposite effects on the likelihood of school attendance and work, where idleness is a third possible outcome. Ray (2000), Ghana: Most variables, including parental education, have opposite effects on the probability of school attendance and work. Patrinos and Psacharopoulos (1997), Peru: Having younger siblings is associated with poorer school performance and increased child labour. Wahba (2006), Egypt: The unskilled adult wage is positively associated with school attendance, negatively with child labour; parental experience as former child labourers positively predicts current child labour but is unrelated to school outcomes.

Child labour and school achievement:

The most common indicator of human capital formation employed in child labour studies is school attendance. This is not because attendance is most closely tied to the acquisition of skills, but because surveys normally ask about childrens school attendance or enrolment. From a theoretical perspective, of course, attendance and enrolment are both inputs into skill acquisition, not outputs. Several studies, however, have taken advantage of data on more direct performance indicators, the topic of this sub-section.

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Effect of Child Labor on the Economics of Pakistan

Grade attainment:
Earlier we reviewed Beegle et al. (2005), which followed the progress of 2133 rural Vietnamese children surveyed in 1992-93 and again in 1997-98. Child labour was defined as incomegenerating work; the strategy was to identify the effect of child labour in the first period on education outcomes in the second. Using hours of child labour as an explanatory variable, the authors found that the mean level of child labour in the early 1990s was associated with a 6% decrease in the highest grade level attained five years later.

Schooling for age (SAGE)

The formula for this indicator was given above. It is an indirect but highly suggestive statistic. While it is possible that a student might trail innocuously due to a late start or a simple pause in schooling, in most cases lagging behind ones age level is a sign of substandard achievement; it also presages an earlier exit from schooling altogether. The first study to feature this dependent variable prominently was Patrinos and Psacharapoulos (1997), where the relationship between work and education outcomes was analyzed for a sample of 2741 children in Peru. They found a significant relationship between child labour and SAGE only for the indigenous portion of their sample, but their technique was a simple logistic regression which did not take account of interactions between variablesin particular, for reverse causation from education to work. Subsequent studies, using more developed methods, have tended to find a stronger relationship. For instance, SAGE was one of the dependent variables analyzed by Sedlacek et al. (2005), discussed earlier. The simple cross-tabulations are not without interest:

Only children currently attending school are included in this table to highlight the effect of work among those who would be recorded as having a positive educational status if school enrolment or attendance were the object of inquiry. In every case working children have a substantially greater tendency to fall behind. Recall that the definition of work employed in this study is restricted to income-generating activity only, so it will tend to understate the SAGE differential associated with more general measures of child labour. In an instrumental variable analysis the authors estimate that a change in exogenous variables that would result in a 10% decrease in the
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Effect of Child Labor on the Economics of Pakistan

incidence of child labour would be expected to reduce the probability of lagging behind ones age group by 12%, a much greater effect than on school attendance alone (see above). (IPEC 2004)

Child labour and health:

Child labour researchers are deeply interested in the health consequences of child work, and a large literature has emerged in this field. It is remarkable, however, that this concern has not carried over into the more general field of development studies. Due to initiatives by the World Health Organization and the World Bank, attention has been drawn in general terms to the relationship between health and macroeconomic outcomes, with research centered on particular diseases like malaria. Nevertheless, the influence of work on health, for adults and children alike, remains below the radar. For example, Mwabu (forthcoming), the health economics chapter in one of the highest profile surveys in the field of development, makes no mention of either child labour or adult occupational health. In the absence of relevant research, there is little we can say about the economic (as opposed to the human) significance of the work-related effects on health, but it is reasonable to assume that injuries and illnesses in childhood in particular can have a magnified impact on subsequent life opportunities. We are therefore fortunate to have a growing body of research on health and child labour that can provide a starting point for future work to place these impacts in a larger context.

Activity matching. Children are drawn to work that is sporadic, requires minimal skill or training and poses few barriers of entry or exit. This fits their social situation, but it may lead to significant mismatching from a health and risk exposure perspective. For instance, such jobs tend to arise in small or micro-enterprises that have little access to safety equipment, where there is little formal training and where rapid turnover of the workforce can lead to insufficient supervision and accumulation of experience. The National Academy cited numerous studies indicating that secondary employment of this sort tends to present greater risks of illness and injury. Thus, social and economic circumstance may push children into precisely the sort of jobs they are least suited to. In developed countries this shows up especially in construction. (Dorman, 2000)
1.

Experience. Some problems faced by children at work are the result of inexperience rather than youth per se. Accident rates are highest for workers who are new to the job, and of course a much higher percentage of children will qualify as new. The effects of experience can compound those of judgment which may be more age-related.
2.

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Effect of Child Labor on the Economics of Pakistan

Muscular-skeletal development. Children are not smaller adults; their bodies are distinctive in significant respects. This can lead to a different set of ergonomic risk exposures than would be faced by similarly-sized adults, yet equipment and work organization rarely make allowances for this effect. A second concern is that work-induced impairments to children may have long-lasting consequences due to their impact on further growth and development.
3.

Sleep needs. Adolescents have different circadian patterns than adults, increasing their capacity for night activity but increasing the cost and physical difficulty of tasks scheduled in the morning. Nevertheless, agriculture in particular demands early morning work, and habitual loss of sleep may impair school performance.
4.

Hormonal and neurological development. The sensitivity of children to chemical stressors can differ greatly from that of adults. While the literature on child and adolescent environmental health is enormous, one risk factor deserves special attention: lead. Relatively small lead exposures can have serious impacts on developmental outcomes, particularly generalized intelligence (IQ) and mood/personality. The toxicology of lead in children is well studied, due to the campaigns against leaded gasoline and paint that have been carried on in developed countries. For a comprehensive summary that focuses on occupational exposures, see Ide and Parker (2005), which reviews 41 prior studies.
5.

Injuries:
As Fassa (2003) reports, the most comprehensive data on child occupational injury rates, fatal and nonfatal, are collected in the United States. Her study offers a thorough review of this literature for the purpose of extrapolating incidence rates on a global level by industry and severity. We will return to her results shortly. Another major review of the US data was assembled by the National Academy of Sciences (1998); they examined 17 studies on nonfatal and 7 studies on fatal injuries in the course of proposing reforms to US child labour regulations. In this section we will briefly summarize the findings of these two overviews, extend coverage to the present by incorporating more recent research and identify sources for non-US data.

General incidence

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Effect of Child Labor on the Economics of Pakistan

The National Academy noted data from the US National Institute for Occupational Safety and Health covering the years 1990-92, which found that 16-17 year-olds faced a risk of fatal injury of 3.51 per 100,000 full-time worker equivalents (FTEs), compared to adult rates that range from 3.87 to 4.56 depending on age bracket. They point out that, given the restrictions on youth employment, these numbers suggest that young workers are likely to be at substantially greater risk controlling for differences in industrial and occupational composition. Indeed, as we will see in the case of agriculture, the failure to adhere to such restrictions, due to a regulatory loophole in the US, does substantially increase the risk faced by young workers. Even so, the picture for nonfatal injuries is even less favourable. The most recent evidence cited by the National Academy finds that 15-17 year olds face a general occupational injury rate of 4.9 per 100 FTEs, compared to an all-ages rate of 2.8. More recent evidence, reported by NIOSH (2002), confirms the ratio of adolescent to adult fatal injuries, while NIOSH (2003) confirms the ratio for nonfatal injuries. The most recent data, presented in Windau and Meyer (2005) are for 1999-2003; they find a fatality rate of 3.1 per 100,000 FTEs for workers ages 15-17, compared to 4.2 for the entire working population. For nonfatal injuries treated in hospital emergency departments, NIOSH (2004) estimates an incidence rate of 5.2 per 100 FTEs for the age 15-17 bracket, compared to 3.0 overall. Cumulative incidence is not reported by public sources in the US, but it appeared in a state-level study conducted by Dunn et al. (1998). They surveyed a representative sample of 562 teenagers, ages 14-17, in North Carolina, all of whom had worked either in paid employment or unpaid farm employment. 54% reported at least one injury on the job, of which 12% required a missed day of either work or school. Finally, White and ODonnell (2000) surveyed 2725 students between the ages of 10 and 16 in Norfolk and North Tyneside, England in 1996 and 1998, finding that 10% of those working in the former town and 7% of those working in the latter had had an accident at work in the previous year that was serious enough to require medical treatment. Unfortunately, quantitative evidence for developing countries is less comprehensive than it should be. Nuwayhid (2005), described previously, found that boys working in small industrial shops in Lebanon were far more likely to have been injured during the previous year than those in a control group. Graitcer and Lerer (2000) constructed a subject group of 78 Egyptian children 10-14 years old working full-time for pay outside the home and paired it
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Effect of Child Labor on the Economics of Pakistan

with a control group of 103 nonworking children drawn from similar Cairo neighbourhoods. They found that 38.2% of the subject group had experienced at least one injury on the job during the previous year and assessed 40% of these episodes as serious. Fentiman et al. (2001) describe injuries to bonded Ghanaian children in lake fishing as frequent and note the high rate of parasitism they endure. By far the most extensive data on injury rates among young workers around the world can be found in the SIMPOC surveys administered with the assistance of IPEC. These vary greatly in the questions they ask, and for this reason it is not possible to cross-tabulate them. Table 16 provides brief summaries; note that the age range of children sampled in these surveys is generally lower than that used by statistical agencies in the US. Since the youngest children are generally given less risky activities to perform, a comparison between Table 16 and the NIOSH data cited above will understate the comparative disadvantage faced by children in developing countries. Incidence and severity of occupational injuries to child workers in selected SIMPOC surveys

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Effect of Child Labor on the Economics of Pakistan

Industrial and occupational factors: Fassa (2003) provides the best-available analysis of US data for the purpose of estimating the distribution of injuries across major industries. Table 17 reproduces her Table 41, fatal injury rates by industry, compiled from three studies published during the 1990s. Mining is by far the most hazardous sector for children with respect to fatal injuries, but agriculture, which accounts for most employment worldwide, equals construction as the second most-deadly. Manufacturing is hardly more dangerous than services and retail in this respect. Is schooling attendance lower for working children? There are fixed number of hours in a day. As such, time spent working necessarily trades off with other uses of child time such as play, study time, or time in school. Despite their importance for child development, especially at young ages, very few researchers consider play and leisure in efforts to measure the opportunity costs of working. Concerns about play were at the forefront of concerns about child labor in early 20th century U.S. (Fuller 1922, Pangburn 1929). In contrast, the extent to which work affects schooling attendance, performance, and attainment is perhaps the second most researched question in the child labor literature (second, to
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Effect of Child Labor on the Economics of Pakistan

the income elasticity of child labor supply). The Minimum Working Age Convention (C138) in part necessitates this interest in that it permits light work in children as young as 12 provided it does not interfere with schooling. When and how does work interfere with schooling? The main challenge in this literature is that schooling and child labor decisions are joint outcomes out of a single time allocation problem. Hence, the interpretation of any found correlation between labor status and schooling is controversial. Do children work because they are not attending school? Do children not attend school because they are working? Do other economic or cultural factors simultaneously influence both schooling and work decisions? Before turning to the problem of establishing causation, a simple description of the association between schooling attendance and work in the MICS countries will be useful

Figure 3 shows school participation rates by gender and activity for children 10-14 in the MICS data (all countries are pooled and the data are weighted by population). Several points stand-out in figure 3. First, children can work and attend school. In fact, in the under 10 population, working children have slightly higher schooling rates than non-working children although this reflects age trends in both the start of schooling and work. Second, of different categories of activity, schooling attendance rates are lowest among children in market work outside of their household. Third, children who work only in market work without any domestic work tend to have lower schooling rates than children who work in domestic and market work. These two pieces of evidence are often cited as justification for only looking at wage work or market work respectively, but they may proxy hours worked and have little further implication. Children who only work in market work without any domestic work are typically working
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Effect of Child Labor on the Economics of Pakistan

substantive hours, and children that work outside the household tend to spend more time working than those who help in the family business.

Production technology
How is child labor influenced by the technology used in production? Put another way; are there certain types of production that are especially apt to draw in working children? Marx argues that a supply of children and women is critical for the early stages of industrialization, because they are both cheap and suited to affine tasks that require little fingers. A similar argument is in Goldin and Sokoloff (1982). With data from early 19th Century U.S., they emphasize that comparative advantage appears to be the explanation for high female and child labor participation rates in early industrialization. The proportion of the northeastern manufacturing labor force composed of females and young males seems to have grown from about 10 percent at the start of the 19th century to 40 percent by 1932. The low relative productivity of women and children in the North's agriculture sector (hay, dairy, grains) kept the opportunity cost of their labor low relative to that in the South. In fact, Goldin and Sokoloff (1984) argue that this may partially account for why manufacturing industries were disproportionate in the northeast. Because most working children are by their parent's side in the family farm or business, an emphasis on industrialization to explain the high rates of working children around the world is clearly unsatisfactory. Moreover, in a contemporary setting, very few studies even document a link between changes in the activities of children and either the industrial composition of local labor market or the types of employer in a community. Edmonds (2003) is one exception. Using both cross-section and a household panel in Vietnam, he considers both the association between the activities of children and the types of industries and employers in the child's community. He observes that domestic work is more prevalent and market work less prevalent in locations where handicraft industries are located but observes very little association between the activities of children and variation in other types of industries (over time or between locations) including manufacturing. For type of employer, Edmonds observes that children are less likely to be engaged in market and wage work in locations where state or large private employers are more prevalent, while hours worked is slightly larger in communities with significant small employer presence. However, the endogenous placement of industries and employers is a serious concern and it is not addressed, and his findings cannot be taken as more than suggestive of future avenues for research.

Who makes child labor decisions?

Unitary models of the household are typically used in the child labor literature. The model of section 1 is one example with its single decision-maker. Implicit within these is an assumption of
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Effect of Child Labor on the Economics of Pakistan

either unanimity of preferences within the family or a dictatorial household. Typically, parents are viewed as the primary decision-makers for child labor supply and schooling. This raises the classic parental agency problem. While parents may make child labor decisions, they do not fully internalize the costs of these decisions. Moreover, this assumption that parents make child labor decisions has led many to assert that child labor supply is evidence of parental callousness and indifference to their children. Specifically, if parents make decisions about child labor supply and do not consider either the current or future welfare in so-doing, then they will select higher levels of child labor than the child would choose or than governments would consider socially optimal. Nimble Fingerstheories of child labor take this parental agency problem to an extreme. They posit that parents always take advantage of employment opportunities open to children and therefore that labor demand is the dominant determinant of whether and how children work. In recent years, more attention has been paid to the fact that there is typically not one decisionmaker in the household, and empirical studies uniformly reject the unitary household model. Decisions about child time allocation will be influenced by mothers, fathers, extended family, and perhaps even children themselves. Edmonds and Sharma (2006) consider an extreme example of how child time allocation can be affected by multiple decision-makers. In studying a population in Western Nepal with a high intrinsic risk of bondage, they argue that child labor is increased and schooling reduced in part, because neither parents, children, nor bondholders have security over the returns to investments in children. They argue their case can be read as an extreme representation of the classic parental agency problem.

Industrial and occupational factors:

Fassa (2003) provides the best-available analysis of US data for the purpose of estimating the distribution of injuries across major industries. Table 17 reproduces her Table 41, fatal injury rates by industry, compiled from three studies published during the 1990s. Mining is by far the most hazardous sector for children with respect to fatal injuries, but agriculture, which accounts for most employment worldwide, equals construction as the second most-deadly. Manufacturing is hardly more dangerous than services and retail in this respect.

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Effect of Child Labor on the Economics of Pakistan

Fassa also reviewed 21 studies on nonfatal injuries, five from outside the US. From these she constructed summary indices of frequency and severity across major industries. Her metric for severity is the Disability Adjusted Life Year (DALY), as documented in World Health Organization (2001). The DALY combines two measures of the burden of injury and disease, Years of Life Lost (YLL) and Years of Life with Disability (YLD). YLL is the expected number of life years lost due to premature death. YLD is the expected number of years lived with a particular disability, times the proportion of functionality lost due to the disability, where complete loss of functionality would be equivalent to death. Functionality ratios are determined through clinical studies, unlike the subjective data employed by a different measure, the World Banks Quality Adjusted Life Year (QALY). Fassa constructed estimates of mean YLD per injury for each industry based on studies of the relative frequency of various impairments and the average YLDs associated with each impairment. Table 18 reproduces Fassas Table 58, giving estimated nonfatal injury rates, average YLD per injury and YLD incidence rates by major industry.

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Effect of Child Labor on the Economics of Pakistan

Mining remains the most hazardous major industry according to the risk of nonfatal injury. From the standpoint of incidence alone, leaving aside severity, the retail sector is second, and agriculture has an even lower frequency. On the other hand, average severity is about the same for agriculture, mining and construction, far greater than for the other sectors. The composite index, YLD per 100 FTEs, still puts mining in first place, followed by construction and agriculture. Meanwhile, no clear pattern establishes itself with respect to age: average severity, as measured by YLD per injury, cannot be distinguished at two significant digits. Care should be taken in interpreting this evidence, since the categories are extremely broad and undoubtedly conceal many important hotspots within major industries. Also, they do not distinguish by gender, and boys and girls may differ greatly in the tasks they perform and the risks they are subject to.

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Effect of Child Labor on the Economics of Pakistan

Theoretical Framework
Dependent Variables:
Economy of Pakistan

Independent Variables:
Adult wages & Child labor Wages Parents, Children Relationship Education System

Teacher Behavior

Application of Laws Loan That Unable to pay

Imperfect financial markets Parental education

Moderating Variable:
Labor Laws

Intervening Variable:
Child Labor

Adult Wages

Parental Loans 25 Parents, Children Education System Teacher Behavior Applicability of Laws Imperfect financial Parental education Relationship

Economy of Pakistan

Effect of Child Labor on the Economics of Pakistan

Labor Laws

Child labor Wages

Poverty

Cost of Production

Unemployment

Relationship b/w Variables

Relationship b/w Dependent & Independent variables:
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Effect of Child Labor on the Economics of Pakistan

Adult wages

(Direct relation With)

Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan Economy of Pakistan

Parental Loan That Unable to pay (Reverses relation With) Parental education Imperfect financial markets Application of Laws Teacher Behavior Education System Parents, Children Relationship Child labor Wages Poverty Cost of Production Unemployment (Direct relation With) (Reverses relation With) (Direct relation With) (Direct relation With) (Direct relation With) (Direct relation With) (Reverses relation With) (Reverses relation With) (Reverses relation With) (Reverses relation With)

Relationship b/w Moderating & Dependent Variables:

Labor Laws (Direct relation With) Economy of Pakistan

Relationship b/w intervening & Dependent Variables:

Child labor

(Reverses relation With)

Economy of Pakistan

Hypothesis Development

If Child labor Wages increase then the economy of Pakistan suffers. If Parental Loan which are Unable to pay increase, then the economy of Pakistan suffer.
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Effect of Child Labor on the Economics of Pakistan

If Parents are educated then economy of Pakistan high. If Labor Laws are strict then child labor does not affect the economy of Pakistan. If Child labor increases then then the economy of Pakistan suffer. If imperfection in financial market is high then the economy of Pakistan low. If teacher behavior towered student is good then economy of Pakistan high. If education system in Pakistan well-structured then the economy of Pakistan high. If relationship b/w parents & children are good then the economy of Pakistan high. If house hold income is high then economy of Pakistan high. If unemployment is high then economy of Pakistan low. If poverty is high then economy of Pakistan low. If cost of production is high then economy of Pakistan low. If adult wages are high then the economy of Pakistan is high.

Research Design
Purpose of Study:
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Effect of Child Labor on the Economics of Pakistan

As our topic is effect of child labor on the economy of Pakistan, in which we try to describe the positive and negative effect of child labor on the economy of Pakistan.

Types of Investigation:
When the child labor is high then the economy of Pakistan suffer duo decrees in adult wages, poverty, Cost of Production and Unemployment. Thats way there is indirect relationship
between child labor and economy of Pakistan.

Research Interferences:
We are just gathers information and showing the relationship between the variables thats way our research interferences is minimum.

Study Setting: i) Non Contrived: (a) Field study:

When the child labor is high then the economy of Pakistan suffer duo decrees in adult wages, poverty, Cost of Production and Unemployment. Thats way there is indirect relationship between child labor and economy of Pakistan.

Unit of analysis: Organization:

In this project we study three fields that are affected by child labor. These are educational field, agricultural field and industrial field. These are the fields that are contributing in economy of Pakistan and we also discuss how child labor affects these fields.

Time Frame: Corse-sectional Study:

In this project we gather data in a single point of time.
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