Minimum wage

One aspect of Budget 2025-26 that has drawn near-unanimous criticism is its total neglect of the minimum wage. The minimum wage, last revised in the 2024–25 budget, remains frozen at Rs37,000 per month, a grossly inadequate amount. While the current government has made tremendous progress in fighting inflation, Rs37000 per month is clearly not enough to get by in an environment where monthly power bills regularly exceed this amount. It is not even fully equivalent to the World Bank’s poverty threshold of $4.20 per day for lower-middle-income countries like Pakistan. Some, particularly those affiliated with the PPP, which is part of the coalition government, have called for a minimum wage of at least Rs50,000. However, in justifying its decision to leave the minimum wage untouched, the finance ministry reportedly pointed to the fact that the private sector, in general, and particularly industries, were not willing to pay even the previous minimum wage. No one would argue that this is not the case. The Public Accounts Committee (PAC) of the Sindh Assembly was informed last Wednesday that over 80 per cent of private industrial units were not implementing the minimum wage order. Considering that Sindh includes the country's business capital and largest industrial city, one can see just how big this problem is. And some analysts even argue that raising wages could spur some industries to shed poorer, unskilled workers.

However, widespread evasion of the law is no excuse to not enforce it or improve it. As some have pointed out, the government’s stance is akin to saying taxes should not be levied or their rates increased because of widespread tax evasion. Experts also point out that, although minimum wages are not fully enforced in the private sector, they set a baseline and many national and international firms adhere to them. A minimum wage hike might have prodded many firms to at least raise the wages of the lowest-paid workers, even if they still would not meet the minimum wage. In this context, the government’s inaction is a missed opportunity to help those Pakistani workers struggling the most. It also does not help that indirect taxation, which disproportionately falls on poorer and salaried workers, has been raised. As such, despite its favourable adjustment of income tax slabs for salaried workers, the new budget still comes off as not caring about the concerns of ordinary Pakistanis.

More importantly, however, the cold shoulder given to the minimum wage issue is a broader reflection of a dismissive attitude towards labour rights and empowerment when it comes to economic governance. One understands that the absolute imperative for policymakers right now is to balance the books, but they are mistaken if they believe that this can be done while neglecting Pakistani workers, skilled and unskilled. Balancing the books will be a lot easier with more growth and development, and an empowered, well-protected and well-paid workforce is a prerequisite for this. It is no coincidence that the most advanced economies in the world today pay a great deal of attention to labour rights and issues, adjusting their minimum wage annually. If Pakistan hopes to join their ranks, its leaders will have to start doing the same.