EDITOR'S PICKS

Our minimum wage line is broken! MAY 14, 2023

Every year on the 2nd of May like clockwork, the city pages of almost all major newspapers
in Pakistan carry the picture of a labourer. It doesn’t matter who that labourer is, what their
name is, or what they are doing. It could be a man carrying bricks in the sweltering sun or a
woman picking cotton in a rural area but the point is always the same — the irony of the
labour day holiday.

While most people use the labour day public holiday for a long weekend, most daily wage
labourers continue to toil. This, of course, is not the point. The state of labour rights in
Pakistan is abysmal and it is not just to do with wage labourers. Sub-contracting, no
protections, and a complete absence of unions make workers a deeply vulnerable class of
people in the country.

And the most at-risk group of workers in Pakistan are those working either on daily ‘dihari’ or
those working on minimum wage. The problem with Pakistan’s minimum wage has many
faces. Not only is the wage understated and miscalculated, but even if it were an honest
representation of subsistence in the current economy, the enforcement and awareness
regarding minimum wage has lightyears worth of work to do, if it is to reach global 
standards.

The economics of the minimum wage line

The term minimum wage is self-explanatory. Legally, minimum wage is the minimum amount
an employer is allowed to pay to a worker for their labour.

In economic theory, it is taken as a level wherein anyone who earns minimum wage is living a
livelihood, good enough to take care of their basic human necessities. In fact that is the
entire reason minimum wage exists. In a market economy of supply and demand, labour
supply will mostly exceed labour demand. Meaning that a country where the majority is not
educated, or not skilled will have an abundance of people who would want to take up menial
jobs. This would lead to a scarcity in jobs and more and more people will be willing to work
for less.

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Unchecked this will go on to a point where people will start working for peanuts, and the
quality of life will become abysmal. Why will they do it? Because something is still better
than nothing. So to avoid such a circumstance, minimum wage is set, as a baseline. So that
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despite any saturation or competition. The quality of life of the citizens of a state is not
compromised upon.

The process to �gure out the minimum wage, however, is contentious. In general,
governments consider a range of factors when setting the minimum wage line, including the
cost of living in an area, the level of in�ation, and the overall health of the economy. They
consult with experts and stakeholders, such as labour unions and business groups, to gather
input and feedback on the proposed minimum wage line. Once that is settled minimum
wages are set.

Where does Pakistan go wrong?

So apparently, apart from the de�nition, the calculation, the maths, the enforcement of
minimum wage and the very de�nition of quality of life, the status quo is pretty set in stone.

In Pakistan, the minimum wage laws are set by the federal government and are enforced by
the provincial governments. The minimum wage rate varies by industry and sector and is
periodically revised based on in�ation and other economic factors.

Section 4 of Minimum Wage Ordinance, 1961 allows Minimum Wage Boards, for each
province, to recommend minimum wage rates for adult unskilled workers and juvenile
workers employed in industrial undertakings.

Let’s now look at the problems with the minimum wage level.

The monthly nature

Pakistan uses a monthly minimum wage system. As compared to most of the developed
world, Pakistan does not have hourly wages. Mostly this wage is taken up to a 26 day
month.

As per the time of this scribe, Punjab has a minimum wage of 32,000 while Sindh
Balochistan, KPK and federal all have a minimum wage rate of Rs. 25,000. Even a bill to
increase the minimum wage in Sindh assembly has been tabled, no results have been
actualized.

There is not a lot that is wrong with the monthly wage rate. Not so much as there is wrong 
with using it as the umbrella wage rate.

Merely using a monthly rate may not account for �uctuations in work hours, which can vary
from week to week or month to month. This means that some workers may earn less than
the minimum wage on a per-hour basis during slow periods, which can make it di�cult to
make ends meet. But this is the least of the problems.

Another big problem is that a monthly minimum wage may not adequately account for
differences in living expenses across different regions or cities. For example, the cost of
living in Karachi will be much higher than in a rural part of Jamshoro, but the monthly
minimum wage is the same for both locations. This is of course a principle problem with
monthly wage rates. In reality what is being paid to a rural worker in Pakistan, is something
you would not wish upon your worst enemies, thanks to centuries of feudalism and bonded
labour.

It is important to note that the Minimum Wages for Unskilled Workers Ordinance 1969,
wages have both the �xed and variable components. The variable components include
dearness allowance, house rent, conveyance allowance, cost of living allowance and special
allowance. However, such “unimportant” details are often overlooked whenever the minimum
wage levels get revised. Any rates or allowances, sans the monthly level, which were ever
applied, are no more applicable.
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Now that the principle �aws have been talked about we look at the substance of the already
de�ned rate.

The understatement problem

If you asked any Pakistani 2 years ago, they would have told you that 25,000 is not enough
money to lead a respectable lifestyle. In an average household of 6 people, 25,000 barely
covered the food and shelter costs. Things like electricity, gas had to be saved up and things
like education and health were put on the back burner. But 2 years ago, the minimum wage
was not even 25,000.

Let’s now come to the present day. In�ation has soared high as year on year in�ation has
breached 35%. This essentially means that if your income was 25,000 a year ago, it needs to
be well over 33,000 right now for you to wield a similar level of purchasing power. The
minimum wages were raised 10 months ago and since then Pakistan has seen a cumulative
total of 30% more in in�ation.

But even that is not the complete picture. With core in�ation lower than the headline in�ation,
energy and food prices have gone up with a signi�cantly higher multiple than other things.
Infact, the food in�ation alone in April stands at more than 48%. This means that a
household’s bottomline is more di�cult to protect in the current in�ationary environment.

Exec. Director, Pakistan Institute of Labour Education and Research (PILER) recently
projected in an interview that each worker should be given a minimum of Rs 50,000 a month
to afford essential things and services such as food, drinking water, education, and
healthcare services.

Open social media and you will see that various people have come up with various numbers,
when it comes to estimating what the minimum income should be. However, none is even
close to the 25,000 mark that is prevalent right now.

As per the world bank, $2 per day is the minimum a household requires to meet its
necessities. However, it was the world bank that reported about 18 months ago how 83% of
Pakistanis do not have access to this amount on a daily basis. Since then the dollar rate has
almost doubled. This is to clarify that the levels at which minimum wage has been set has
never been enough. It is not just about the current in�ation. It has always left room for labour
exploitation. 
Now let’s for a second assume that the aforementioned problems with minimum wage do
not exist. Let us hypothesise a world in which minimum wage levels were de�ned precisely
and were comparable with the dollar equivalent of other global minimum wages. It would still
be a problem. Why? Because of the enforcement of these laws.

The enforcement problem

According to the Pakistan Institute of Labour Education and Research (PILER), an estimated
80% of unskilled workers are not receiving the minimum wage of Rs25,000 per month, which
was awarded a few months ago. And this is where the crux of the problem lies.

Talking to Pro�t; lawyer and labour rights activist Umar Gillani stated how the enforcement is
all over the place. “The biggest glaring error exists in the enforcement of the minimum wage
laws. It is not that good mainly because it is a complaint driven mechanism.”

He informed that in his experience, most of the people who were being underpaid did not
possess the means to turn on their employer. And that makes sense, a person who knows he
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will be replaced the moment he steps out of line is highly unlikely to go against his employer.

Talking to a media outlet, the Executive Director PILER, Karamat Ali said that, “There is no
mechanism in place to ensure implementation of the government order or to check which
industrial and commercial houses are paying their employees what.”

Factor in the lack of public education and basic civics, the person might altogether be
unfamiliar with the very existence of minimum wage laws. Of course it is not to say that
those who do know about their rights have a secure working environment. And can willingly
seek protection from labour exploitation.

Talking to Pro�t, on the subject of anonymity, a utensil factory owner from Rawalpindi, stated
that it is not in their best interest to hire adult men. “These men have families to take care of.
Not only are they not willing to work the proper(after) hours, they also expect a salary of
more than 20,000. 20,000 is what we give our experienced workers”. The factory owner also
made a compelling case for hiring younger boys instead. Adult boys who were not expected
to contribute signi�cantly at home.

The awareness problem

They say that ignorance is bliss, but not in this case. In fact one of the very reasons as to why
employers are able to exploit labour in Pakistan is because they are unaware.

Unionisation is actively discouraged and any work that is done to raise awareness amongst
the masses. According to Mr. Karamat Ali, Pakistan needs to carry out a rigorous awareness
campaign across various media much like the UK government did in the year 1990.

Awareness comes hand in hand with another thing and that is education. A lot of the labour
would not be unskilled to begin with if it was for education. But that is just the tip of the
iceberg.

Many workers, for instance, are unable to take legal action because their contracts are not
renewed once they expire, and they lack proof of employment. Without the proof of
employment it becomes easy to lay them off if they want a better wage.

Of course awareness can only do so much. The power that the rich wield in a country with
polarity in power structures makes it impossible for the poor to take up arms against the 
rich. It is perhaps this very reason that stops this topic from being on the agenda of
assemblies and on the manifestos of political parties.

Conclusion

Due to the systemic problems prevalent. The situation is many times worse than can be seen
on the infographic. Pakistan may be above the 0$ mark but the countries below us are only
those that do not even have a requisite minimum wage.

Minimum wage is important to talk about because It highlights the urgent need for action to
address poverty and inequality in Pakistan, and to ensure that workers are paid a fair wage
for their labour. It is a reminder that behind the statistics and numbers are real people with
real struggles, hopes, and dreams. Something that should take a far greater precedence over
power politics.

And the minimum wage is not just about money. It’s also about dignity and respect. When
workers are paid a fair wage, they feel valued and appreciated for their hard work. They can
provide for their families and contribute to their communities. And when everyone is paid a
fair wage, it creates a more just and equitable society for all. When we talk about minimum
wage, let us not forget the human cost of poverty and the urgent need to address it. Let us
not turn a blind eye to the suffering of those who are trapped in its grip, but instead, let us
work together to create a brighter future for all Pakistanis.