Skip to main content

Manufacturers Threaten to Leave Pakistani Province Over Wage Hike

Manufacturing businesses are threatening to exit the Pakistani province of Sindh after the High Court upheld last month a 43 percent increase in the minimum wage, retroactively applying the pay bump to unskilled adult and juvenile workers in all industrial and commercial enterprises from July 1.

Representatives from the Karachi Chamber of Commerce and Industry, the Sindh Industrial Trading Estate Association and other employer groups have challenged the decision to raise the floor wage from 17,500 Pakistani rupees ($103.09) to 25,000 rupees ($147.28) per month, insisting that the change is impossible to put into action.

“Employers are preparing to go to the apex court since we are not left with any other option,” Ismail Suttar, president of the Employers’ Federation of Pakistan, told Arab News. “The increase in wages will not just remain limited to the unskilled workers. We will have to raise the wages of skilled employees as well if the decision is implemented. It is not humanly possible for us to do that.”

The decision, Suttar added, will force manufacturers to decamp to other provinces, his own included. “This will destroy our businesses and make industrialists relocate from the province since it will increase the cost of doing business here,” he said. “I am thinking of moving my own industry to Balochistan since it will be a one-time cost.”

Sindh Chief Minister Murad Ali Shah said that the increase was necessary, however, because an “unprecedented tsunami” of price hikes in Pakistan has “deprived poor people of simple bread and butter.”

Related Stories

“Therefore, the government has decided to ensure payment of 25,000 [Pakistani rupees] in [the] minimum wage and may increase it further to provide relief to the low-paid employees in [the] public and private sector,” he told Arab News.

But most industries weren’t paying the minimum wage of 17,500 Pakistani rupees, “despite the fact that the prices of most essential items like flour and electricity have substantially increased,” Nasir Mansoor, deputy general secretary of the National Trade Union Federation, told the outlet. “The situation is painful for the working class as they are reeling from the impact of high prices. Wages constitute only three to five percent of the overall cost of industrial inputs and implementing the Sindh administration’s decision will not impact the overall cost to a large extent.”

Because of the Covid-19 pandemic, workers in Pakistan have also had to grapple with wage theft and employment instability, said Ayesha Barenblat, founder and CEO of Remake, a fashion advocacy group based in Los Angeles. “I would urge brands and manufacturers producing in Sindh to support this badly needed increase in the minimum wage, especially since workers have needed charitable support to simply put food on the table over the last year and a half,” she told Sourcing Journal.

Late last month, several human-rights and labor organizations, including the Pakistan Institute of Labour Education and Research, the Human Rights Commission of Pakistan and the National Trade Union Federation, announced that they will be filing a public interest lawsuit in the Sindh High Court to demand an inquiry into the non-payment of workers’ wages by two dozen garment-exporting factories in Karachi during the coronavirus crisis.

According to a study conducted by the Asia Floor Wage Alliance, more than 139,000 workers in 23 facilities suffered wage losses of roughly $54,660,525 in 2020 after their multinational brand and retail clients nixed orders or demanded retroactive discounts for goods already in production.

Between March and May of that year, 81 percent of garment workers tumbled below the poverty line and household debt ballooned by 113 percent. Nearly all the workers surveyed experienced “employment shocks” in the form of layoffs or terminations. Even those with an average of five years of work experience found themselves without enough savings to get them through a month of unemployment without skipping meals, accumulating debt or selling off assets.

“Garment supply chains are unregulated and extremely asymmetrical with brands being the most powerful actors,” the labor groups said in a statement. “Brands control consumer markets in the developed economies, where they sell garments at high prices. At the same time, they control labor markets in developing economies or production countries where they push down labor costs through wage theft.”

The organizations are calling for brands sourcing from these factories to be held legally liable for the wage losses as “joint employers” under Pakistani law. They’re also arguing that such exploitative purchasing practices, which underpin wage theft, should be considered illegal and unconstitutional.

“Brands falsely project themselves as ‘buyers’ rather than as employers of workers in their supply chains, creating intense competition among suppliers and governments to push down labor costs to retain the businesses of the brand,” they added.

Pakistan’s garment industry, which employs 15 million workers, is the country’s second-largest employer after agriculture, accounting for 60 percent of its export earnings. For the fiscal year ending June 30, 2020, Pakistan exported $12.5 billion in textiles and apparel to countries such as  China, Germany, the United States and the United Kingdom, according to the Pakistan Bureau of Statistics, a decrease of 6 percent over the previous year.