ISLAMABAD (Kashmir English): The country’s foremost government-sponsored think tank, Pakistan Institute of Development Economics (PIDE), has recommended that the country’s federal government undertake comprehensive reforms regarding its minimum wage policies and hike the country’s minimum wage by 12.5%, recommending a new monthly rate of Rs. 45,000 for FY2026-27.
In a comprehensive policy brief filed before the budget cycle, PIDE warned that the current practice of wage fixing in Pakistan has turned more “symbolic and discretionary” and is no longer compatible with ongoing inflation, rising cost of living, and food/energy prices, making it vulnerable to household risks.
Minimum wage fixation needs to be taken seriously as a credible macro-social tool and cannot just be another routine exercise carried out each year within the context of the country’s persisting inflation and informal labor markets.
PIDE has asked for an urgent reform regarding the process of wage setting, making it more formalized, predictable, and data-driven in line with ILO practices.
Rather than depending on one criterion like inflation or poverty lines, the proposed system utilizes a combination of different components, namely:
- wage protection against purchasing power erosion
- adequacy for workers and their families
- affordability in the labour market
- partial productivity sharing
- economic disparities among provinces
- Further, the think tank recommended annual mandatory reporting on the results of wage policies, as well as improved monitoring and enforcement mechanisms.
Based on data provided by the Pakistan Bureau of Statistics (PBS) and the Planning Ministry, PIDE calculated a reference wage for the country of Rs. 45,000 per month, which is equivalent to a 12.5% increase over the currently declared minimum wage rate of Rs. 40,000.
In the analysis of PIDE, the failure to implement the wage policy of Pakistan was mainly caused by ineffective enforcement that resulted in systematic underpaying of employees, especially in the unorganized sector, where more than 79% of Pakistanis work.
According to the proposed model, “national floor with provincial calibration,” each province would be constitutionally entitled to establish higher wages above the national standard, based on certain criteria:
- Punjab: Rs. 45,000
- Sindh: Rs. 46,000
- Khyber Pakhtunkhwa: Rs. 46,000
- Balochistan: Rs. 45,500
PIDE says that the system strikes the balance between national coherence and regional variations in cost-of-living and labor markets.
“Pakistan cannot pursue its policy of export-led growth at a time when we have working poverty and wage uncertainty,” stressed Dr. Nadeem Javaid, Vice-Chancellor of PIDE.
Sustainable reforms should take care not only of macroeconomic stability but also of predictability, dignity, and security of employees.
Dr. S. M. Naeem Nawaz, Co-Author and Professor of Economics, pointed out that an achievable and enforceable wage floor should not be overly based on indices like CPI or poverty line.
