Minimum Wage – The Bare Essentials

Published in Dawn, March 21st, 2021

No aspect of labour economy is as divisive and as controversial as minimum wage. On one side are economists and employers who think minimum wage creates distortion in the labour market, leads to unemployment and lowers productivity. Add to this the anti-poor section who thinks the poor are lazy, illiterate and deserve low wages! On the other side are sociologists, political economists, pro-poor policymakers who think all human beings have a right to a decent living and thus need a wage floor to put their feet on the ground so as not to fall into the abyss of poverty.

Debate on minimum wage has intensified in the 21st century since the American economists challenged the classical view and presented empirical evidence that minimum wage increases do not have adverse effect on employment in Myth and Measurement: The New Economics of the Minimum Wage in 1995. Factors which impact productivity are workers’ education and skills and technology. However, these topics, worthy of greater debate in Pakistan, do not receive as much attention or ignite sentiments as does minimum wage.

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Minimum Wages in the Time of Globalization

Early June is the time the workers in Pakistan hope for some respite in managing their meager household budgets and look forward to a raise in minimum wage announced with the annual budget of the country. The minimum wage for unskilled workers currently in Punjab, Sindh and Khyber Pakhtunkhwa is Rs10,000 per month, while in Balochistan it is Rs9,000.

With the current family size of 6.8 and 1.5 earning members per family in Pakistan, a monthly income of Rs10,000 translates into Rs73.52 (less than one dollar) per person per day in the household. The picture gets gloomier when we look at the national average monthly wages reported in Pakistan Labour Force Survey 2012-2013 — 20pc workers earn up to Rs5,000 and 41.73pc make an income between Rs5,000 to Rs10,000. With a 9pc inflation rate, minimum wages in real terms amount to even less.

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