New Budget: Rs. 45,000 Minimum Wage Recommended for Pakistan

The Pakistan Institute of Development Economics (PIDE) has recommended a national minimum wage reference benchmark of Rs. 45,000 per month for FY2026–27, 12.5 percent more than the current notified wage of Rs. 40,000.

In Policy Viewpoint No. 62, titled “Reforming Minimum Wage Determination in Pakistan: From Wage Announcements to Wage Governance,” PIDE researchers propose a hybrid framework aligned with International Labour Organization (ILO) principles.

The model balances purchasing power protection, adequacy for worker households, labour market affordability, partial productivity sharing, and provincial implementation realities.

Highlighting the importance of the reform, Dr. Nadeem Javaid (SI), Vice Chancellor of PIDE and Member of the Planning Commission of Pakistan, said, “Pakistan needs a credible wage governance system that balances worker protection, productivity, business sustainability, and macroeconomic stability within a transparent institutional framework.”

“A country aspiring for export-led growth and social stability cannot afford working poverty, wage uncertainty, and fragmented labour market governance. Sustainable economic reform must also translate into dignity, predictability, and economic security for workers,” he added.

The proposed framework is based on four key pillars:

• transparent evidence-based wage setting,
• bounded provincial adjustment,
• effective enforcement mechanisms, and
• annual reporting on outcomes.

Under the proposed “national reference benchmark with provincial calibration” model, provinces would retain constitutional authority to set wages at or above the national floor based on local economic conditions.

Indicative provincial benchmarks suggest Rs. 45,000 for Punjab and Khyber Pakhtunkhwa, Rs. 46,000 for Sindh due to higher urban living costs and formal-sector concentration, and Rs. 45,500 for Balochistan, reflecting geographic and market access challenges.

Dr. S. M. Naeem Nawaz, Professor of Economics at PIDE and co-author of the study, said, “A credible wage floor must be one that workers can realistically receive and provinces can realistically enforce. This requires moving beyond CPI-only or poverty-line-only approaches toward a hybrid model that accounts for affordability, compliance capacity, and the reality that nearly 80% of Pakistan’s workforce remains informal.”

Our framework prioritises phased and realistic enforcement—starting with public procurement, outsourced government contracts, and large registered firms, before gradually extending coverage to SMEs, agriculture, and domestic work,” he added.

The study argues that minimum wage policy now has implications far beyond labour departments, influencing household purchasing power, poverty levels, labour informality, domestic demand, productivity, and overall social stability.

With average inflation recorded at 6.19 percent (July–April FY2026), April 2026 year-on-year inflation at 10.9 percent, and household food insecurity rising to 24.35% in 2024–25 from 15.92 percent in 2018–19, the report notes that the urgency for wage governance reform has significantly increased.

PIDE has submitted the proposed framework to the Planning Commission of Pakistan for consideration and further action toward developing a coordinated, transparent, and sustainable minimum wage governance system.

Key recommendations of the framework include:

• Adoption of the Rs. 45,000 national reference benchmark for FY2026–27 as part of the proposed annual wage governance system.
• Introduction of enforceable minimum wage compliance clauses in public procurement and outsourced service contracts.
• Phased enforcement starting with the formal sector before expanding to SMEs, agriculture, and domestic work.
• Mandatory provincial Minimum Wage Implementation Reports to improve transparency, accountability, and monitoring.