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Pakistan Minimum Wage Increases 12.5%

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Prime Minister Yousuf Raza Gilani announced today that the minimum wage for laborers in Pakistan is increasing by one thousand rupees to Rs 8000, or roughly USD$88 per month. There will also be a twenty percent increase in pensions and increases of death grants and marriage grants. The increases follow a similar Rs 1000 increase in 2010.

Prime Minister Gilani also urged the swift implementation of the Industrial Relations Act of 2012, passed in March, and the deployment of the Labor Policy of 2012. Both these legal measures exist to ensure the protection of workers rights. The IRA addresses the formation of trade unions and the settlement of employer-employee conflicts. Its passage legitimized over 400 unions and 70 labor associations.

Prime Minister Gilani said, “We believe that secret of any country’s development lies in the value of hard work and its human resources. A society, which does not address the basic needs of its working classes, remains backward.”

The move is political. Prime Minister Gilani is a member of the Pakistan People’s Party, a democratic socialist party that is attempting to stabilize the shifting economic and security situation in Pakistan using populist measures. The May Day announcement is intended to defray criticism that the government is corrupt and inactive in the lives of its citizens.

Within a regional context, an increase in wages without compensating productivity improvements will decrease the competitiveness of Pakistan’s industry. In Bangladesh, for example, the minimum wage in the garment sector is only $58 per month, according to the BBC. In India in the garment sector it is roughly $60 per month for unskilled labor. The unemployment rate in Pakistan as of 2011 was 15.1%, but substantial underemployment exists as well, and this move may exacerbate that situation by discouraging new investment.

Manufacturers working in Pakistan already pay a premium over countries with more robust infrastructure, though the government recently announced plans to exempt the textile industry from its program of rolling blackouts.

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