In an effort to improve employmentoutcomes and industrial productivity, the Government ofPakistan (GoP) has launched a dual-track reform processinvolving broad-based overhaul of labor laws andinstitutions, and expansion and reform of the Vocational andTechnical Training (VTT) system. Labor market regulation andlaws are useful economic and social institutions designed toprotect workers from undesirable consequences of marketfailure such as arbitrary or discriminatory actions byemployers. They also help stabilize employment and householdincomes against aggregate business cycles and shocks. Laborregulation is also an important element of society'sinstruments for the provision of social security and themaintenance of health, safety, and environmental standardsin economic activities. Labor regulation in Pakistan isexcessive by international standards, as can be seen fromdata on a number of indicators of labor market flexibility.All things considered, Pakistani industry and workers willseem to be better off with a more flexible labor market. Thereport analyzes the existing labor laws and institutions,along with the new draft laws, from this point of view. Italso provides a review of the current VTT system and changesfor it.
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