WHO BENEFITS FROM THE INCREASE IN THE MINIMUM

WAGE?WHO IS HUURT?ACASE OF PAKISTAN.

Information on Minimum Wage in Pakistan:
Minimum Wage is the wage level (set by Government, either after consultation with the social partners
i.e. worker organizations and employer associations or unilaterally) below which it is illegal for the
employer to pay his/her employees.

Minimum Wage in Pakistan is set by the following two acts:

Pakistan Minimum Wages for Unskilled Workers Ordinance, 1969 (no longer in use after the 18th
Amendment) The Minimum Wages Ordinance, 1961 (applicable in ICT, Sindh & Balochistan) The Khyber
Pakhtunkhwa Minimum Wages Act, 2013 The Minimum Wages Ordinance, 1961 (adapted in Punjab by
2012 Amendment Act).

In June 2015, the Federal Government has raised the minimum wage from Rs. 12,000 to Rs. 13,000 per
month for unskilled workers. This decision was also repeated in the budgets presented by the Provincial
Governments of Punjab, Sindh & Balchistan. The Khyber Pakhtunkhwa province has also notified its
minimum wage as Rs. 12,000. The minimum wage rate for unskilled & juvenile (14 years to 17 years)
workers is Rs.13,000 per month in the provinces of Punjab, Sindh, and Balochistan as well as the
Islamabad Capital Territory. These minimum wage rates are applicable from 01 July 2015. The daily
minimum wage for an 8 hour work day is Rs. 500 (and Rs.13,000 for 26 working days). Minimum wage
for unskilled & juvenile workers (14 years to 18 years) is notified as Rs.12,000 per month in Khyber
Pakhtunkhwa with effect from 01 July 2014. The daily minimum wage in Khyber Pakhtunkhwa is
Rs.461.54 (and Rs.12,000 for 26 working days).The Khyber Pakhtunkhwa Government had fixed a higher
minimum wage in 2014 (Rs. 15,000 per month) however it was fixed unilaterally by the Government
without forming and consulting the Minimum Wage Board. This notification was suspended in March
2015 by the Peshawar High Court. The new notification, declaring Rs. 12,000 as minimum wage for
unskilled workers has been issued in September 2015 and is effective from back date. Khyber
Pakhtunkhwa again issued a minimum wage notification in January 2016 declaring the minimum wage as
Rs. 13,000 with effect from July 2015.

Minimum Wages for Unskilled Workers used to be fixed under the 1969 Ordinance however after
devolution of Ministry of Labour to provinces, the wages are announced under Minimum Wages
Ordinance, 1961 which applies to all industrial establishments’ employees (whether skilled, unskilled or
apprentices and even domestic workers) but it excludes the employees of Federal or Provincial
governments, coamine employees or persons employed in agriculture.

There is yet another law that provides for minimum wage fixation for coal mine workers i.e. The Coal
Mines (Fixation of Rates of Wages) Ordinance 1960. Provincial Governments issue minimum wage
notifications for these coal miners and they may also consult Mines Welfare Board in wage fixation (but
it is not necessary).

As for the Minimum Wages Ordinance, 1961, specially constituted tripartite provincial minimum wage
boards recommend minimum wage rates to the provincial governments. These tripartite (i.e. where
three social partners; worker, employer and government; meet, discuss and solve work related issues
together) boards are constituted at the provincial level and they are entrusted with the statutory task of
recommending the minimum wage rates for time work; piece work; overtime work; work on weekly rest
day; paid holidays and the minimum time rates for workers employed on piece work so as to guarantee
minimum wages for such workers on a timely basis. The status of provincial minimum wage boards is
only advisory and the power rests with the provincial government to declare these wages. These
recommendations become enforceable only when accepted and notified by the respective provincial

governments. The Minimum Wage Boards can also periodically review these wages and recommend any
amendments to their respective governments however authority again rests with the government
whether it adopts and give these recommendations a legal status. Implementing minimum wage in
Pakistan is still a far cry.

Implementing minimum wage in Pakistan is still a far cry:

Pakistan has the ninth largest workforce in the world working mostly in the informal sector,
approximately contributing between 25 to 40 percent of the GDP. Is the working class getting paid even
the bare minimum?

A look into the plight of the lower class workers makes one think, when a person chooses to be an
entrepreneur having a capital to invest, either earned, inherited or acquired through loans, they more or
less demonstrate same behaviour towards the working class. Why do the entrepreneurs act greedily and
fail to comprehend the rudimentary requirements of human beings? The unfair system of payments
deprives them of their share of the profits and living standards. To address this issue, fairer system of
minimum wage was introduced to succour the workers to raise their living standards.

In 1894, New Zealand was the first country to introduce minimum wage laws covering all the industries
and businesses across the country followed by the Australia which proved rather successful leading to
enactment of minimum wage in other countries. In Pakistan, the first legislation was passed in 1961,
which established the Provisional Minimum Wage Board to fix salaries for unskilled workers in the
organisations with more than 20 or more workers. Later, law was amended in 1969 and 2001 with new
legislations introduced.

Over the long period of time, economists have debated intensely on the impact of minimum wage.
Some of the economists tended to have opposed idea of minimum wage on the grounds that they
reduce employment based on the researches across the American regions. The results had been mixed
until an extensive research established the fact that minimum wage does not hurt employment. The idea
that in a competitive market anything that artificially raises prices of labour will curb demand for it and
the first to lose job will be an unskilled worker has proved wrong.

Though, especially in recent years, federal and provisional governments have been vocal about the
legislation & and implementation of minimum wage in Pakistan but have apparently failed to implement.

Pakistan has the ninth largest workforce in the world working mostly in informal sector, approximately
contributing between 25 to 40 percent of the GDP. Is the working class even getting paid the minimum
wage, knowing that such a big chunk of cherry contributes informally towards the economy? It can be
observed in all provinces where local governments have failed to implement this notion.

Recently, I have been questioning the waiters I get served by, the salesmen I buy stuff from, delivery
drivers from fast food restaurants. They all share the same feeling of being cheated and ill-treated.
When we start liking wrong things and a wrong thing becomes exceedingly important for us that’s when
societies get morally corrupt.
No matter how much the annual profit is, the rate is fixed for them as supply exceeds demand, and
plenty of them are available at lower rates. One can imagine the state of our morality as the people who
clean up our filth and squalor are paid lowest of them all. What generosity we show when it comes to
cleaning! We love cleanliness but those who perform these tasks for us deserve nothing more than
approximately Rs. 5,000 per month.

I believe that the providers of the basic services need to be valued more; the manufacturers working at
factories in our industrial cities like Sialkot, Faisalabad and Karachi who actually produce in adverse
conditions of the factory floors end up being worse off, need to be valued more. The capitalists running
the factories take home all the profits and ironically make big donations to charities.

Studies have been conducted to examine the impact of minimum wage legislations in Pakistan but they
have not been particularly accurate. Since, it is not possible to apparently infer the information from
Labour Force Survey data, by quantifying the impact of increasing minimum wage in all four provinces is
a huge and complicated task because it requires information to be collected from labour force itself
through survey.

Slogans to increase the minimum wage to Rs. 14,000 were raised from all corners as argued earlier, but
this does not take in account the inflation, as people are deprived of basic necessities such as housing,
food etc. Poor classes need more protection from rising inflation. I think minimum wage in Pakistan
should be indexed to prevent the erosion of purchasing power of masses living at around poverty line.
Regulators and authorities must find a way, as it could be a huge step towards increasing consumption
and aggregate demand in Pakistan.

In 2016, very much like the previous two decades, federal and provincial governments have failed to
implement minimum wage due to bad governance and subsequent corruption and reluctance to
neutralize inflation. This results in continuation in sufferings of the poor as millions keep hovering around
the poverty line.

Nelson Mandela stated:

“Poverty is not an accident. Like slavery and apartheid, it is man-mad and can be removed by the actions
of the human beings”