Case for hike in minimum wage in view of inflation

ISLAMABAD: In the wake of rising inflationary pressures whereby weekly prices witnessed a surge close to 50 per cent, the government has not yet revised upward the minimum wages of Rs25,000 for workers to ward off the negative impacts of price hike.

At a time when the government proposed a cross-fuel subsidy and is giving free-of-cost flour bags to inhabitants belonging to Punjab and KP at an estimated cost of Rs74 billion for the provision of free Atta only in Ramazan, the lowest strata of the public and private sector are not on the radar of the government. The government did not even bother to revise the minimum wage despite the fact that inflation broke records of the last 50 years. Even a middle-income professional has been facing the brunt of increasing inflationary pressures, which were highlighted by an international media organization in its recent report.

Under the tough conditions of the IMF programme, the government implemented all measures, including hiking electricity and gas tariffs. POL prices surged to unprecedented levels. The exchange rate adjusted massively in a short span of time-frame. The government slapped a mini-budget to fetch additional taxes of Rs170 billion in the last four months of the current fiscal year. The GST rate was hiked by 1 per cent from 17 to 18 per cent. All these measures fueled both the CPI-based and SPI-based inflation, which stood at 31.5 per cent on monthly and 46.7 per cent on weekly basis.

When contacted, economist Dr Lubna Shahnaz said there was a dire need to revise the minimum wage at federal levels and all the provinces should pursue this, keeping in view the rising inflationary pressures. The minimum wages should be fixed at around Rs32,000 to Rs35,000 per month.

When Dr Khaqan Najeeb, former adviser to Ministry of Finance, was contacted, he said that considering inflation at nearly 50 years high, it was necessary to revise the minimum wage of Rs25,000. It is equally important that the private sector should also increase wages after the government. Families are finding it difficult to feed themselves given 47 % food inflation in the country. “We must recognize that the majority of inflation is driven by rise in administered prices of energy and supply side shortages.”

He said the authorities including the SBP must conduct research for policy makers to decide the quantum of increase in minimum wages without causing a major inflationary impact. If the past research, which is dated and upgraded is any guide, Rs5,000 is the minimum threshold to be increased with a little inflationary impact. It is intriguing that the IMF has not felt the need to recommend such an action considering that they mention precisely in the Memorandum of Economic and Financial Policies in the risk section of social unrest fueled by increasing prices and shortages of essentials.