The informal sector is frequently attacked on the grounds that
it offers very low earnings in very unfavourable and exploitative
working conditions with no prospects for upward mobility for its
participants. Since entry in this sector is not restricted, therefore,
it is argued that a mushroom growth of labour supply takes place
particularly at times when growth in the formal sector slows down
[Richardson (1984)]. Therefore, earnings in this sector do not reflect
variations in personal capabilities on account of human capital
endowments. As a result, it is opined that workers in this sector face a
flat age-earnings or experienceearnings profile because they are not
rewarded for their schooling and accumulated experience with age. The
unrestricted entry of labour may be the case in some sub-sectors of the
informal sector where no specific skills are required. However, it
cannot be generalized because there are many activities which require
from theiT workers to have learned some sort of skills, thus creating
barriers to entry. The existence of such barriers may explain higher
earnings in these sub-sectors [Burki (1989); Burki and Ubaidullah
(1990)].
Rates of Returns to Education and the Determinants of Earnings in
Pakistan
