iving wage has emerged as a fundamental debate, addressing the pressing need for remuneration that enables workers to maintain a dignified standard of living. A living wage is designed to provide for essential needs such as food, clothing, shelter, healthcare and education, thereby promoting economic equity and social justice.

Given that the prevailing socio-economic landscape is characterised by high inflation and income disparities, the formulation of a living wage framework is crucial for achieving sustainable development in Pakistan.

Recent economic indicators suggest a moderate recovery in Pakistan, with a reported growth rate of 2.38 percent. However, this growth trajectory is overshadowed by a significantly high inflation rate of 28.35 percent (as of January 2024), affecting the purchasing power of low-income households. Too many households today struggle with the challenge of affording basic necessities for the issue to be taken lightly.

Despite the recent decline in inflation, the financial burden on salaried workers remains considerable, highlighting the inadequacy of current wage structures in ensuring a reasonable standard of living. According to the Centre for Labour Research, subject to regional variations and family size, an appropriate living wage in Pakistan is Rs 51,076 per month.

The estimated cost of living in urban Sialkot, for instance, stands at Rs 43,709. In rural Khyber Pakhtunkhwa, it is Rs 58,600 according to Global Living Wage Coalition. The significant regional disparities highlight the necessity for a living wage framework that is responsive to local conditions.

As of 2024, the official minimum wage across provinces ranges from Rs 32,000 to Rs 35,000 per month, reflecting a small increase over the previous year. It remains substantially below the threshold for a living wage that makes challenges faced by workers more intense, particularly those employed in the informal sector earning less than the legally mandated minimum wage.

Approximately 73 percent of Pakistan’s workforce is engaged in the informal economy, where wages are frequently unregulated, and compliance with minimum wage laws is rare.

The disparity between the minimum wage and a living wage stresses the economic vulnerabilities. For example, although the minimum wage has been raised, the pace of this adjustment has not kept up with inflation, leading to an expanding gulf between workers’ earnings and the necessities for a dignified living.

Focusing on the international trade landscape, the GSP+ scheme, a trade agreement between the EU and Pakistan which requires the implementation of 27 international conventions, including labour standards like the living wage.

A failure to fully comply with these conventions can result in Pakistan losing preferential tariff treatment from the EU. New EU supply chain laws emphasise social standards, including paying a living wage, which could indirectly affect the supply chain of the companies in Pakistan.

Establishing a living wage in Pakistan is not only a matter of social justice but also necessary for promoting economic stability and sustainable development. An approach focusing on policy reform, economic diversification and enhanced social protection is required. 

As the living wage is essential for socio-economic stability, it can increase the productivity of workforce and value production. Low wages lead to workers taking multiple jobs, reducing productivity and contributing to a rising crime rate, while also driving a significant brain drain. A lack of effective trade unions in Pakistan further hinders proper wage determination, aggravating the issue of low wages and impacting the economic development of the country.

The consequences of inadequate wages extend beyond individual households to the socio-economic framework of the country. High inflation has significantly diminished the purchasing power of the working class, driving many into acute poverty.

The Covid-19 pandemic had further intensified these vulnerabilities, disproportionately affecting lower-income populations. Furthermore, the limited coverage of social security systems leaves a substantial portion of the workforce exposed to economic shocks, thereby necessitating urgent reforms.

Recent analyses indicate that the share of individuals living below the poverty line has risen drastically. Some estimates suggest that 39.3 percent of the population now lives in poverty, a sharp increase from 24.3 percent prior to the pandemic. This alarming trend illustrates the pressing need for the implementation of a living wage, as many households struggle to fulfill their basic needs.

The journey towards implementing a living wage framework in Pakistan is burdened with challenges, including persistent inflation, the dominance of the informal sector and regional disparities in income levels.

Prioritising sectors with high wage capacity in economic diversification efforts and establishing comprehensive social protection systems will protect a large share of the population facing situational poverty from turning into generational poverty.

Promoting collaboration among stakeholders including government, private sector, labour unions and civil society is essential for the successful realisation of a sustainable living wage framework.

Implementing a living wage initiates a cycle of economic gain. It directly increases workers’ disposable income, covering essential expenses such as food, housing, healthcare and education, while reducing reliance on social welfare programmes.

This re-allocation of government resources allows for prioritizing other areas. With improved financial security and enhanced worker well-being, labour productivity increases, leading to improved firm performance. On the demand side, higher wages result in higher consumer spending, which accelerates demand across industries, encourages business expansion and fosters diversified economic growth.

As companies scale, job opportunities rise, reducing unemployment and expanding the tax base, thereby generating more government revenue for development. With increased income, workers can invest in education and training, leading to higher skills and innovation. This attracts high-value industries and foreign investment, promoting long-term, sustainable economic growth.

Establishing a living wage in Pakistan is not only a matter of social justice but also necessary for promoting economic stability and sustainable development. A comprehensive approach focusing on policy reform, economic diversification and enhanced social protection is required to create a work environment where employees can earn sufficient income to support themselves and their families.

The writer is a research associate at Sustainable Development Policy Institute