The Pakistan Institute of Development Economics (PIDE) has proposed increasing the national minimum wage benchmark to Rs. 45,000 per month for FY2026-27, representing a 12.5 percent increase from the current minimum wage of Rs. 40,000.
The recommendation was presented in PIDE’s Policy Viewpoint No. 62, titled “Reforming Minimum Wage Determination in Pakistan: From Wage Announcements to Wage Governance.” The report outlines a comprehensive wage governance framework designed in line with International Labour Organization (ILO) principles.
According to the study, the proposed model seeks to balance worker welfare, business sustainability, productivity growth, affordability for employers, and regional economic differences across provinces.
Dr. Nadeem Javaid, Vice Chancellor of PIDE and Member of the Planning Commission of Pakistan, emphasized the need for a transparent and reliable wage governance system that protects workers while supporting economic stability and business competitiveness.
He noted that sustainable economic growth requires addressing working poverty, wage uncertainty, and labour market inefficiencies while ensuring workers benefit from economic progress.
The proposed framework is built around four key pillars:
- Evidence-based and transparent wage determination
- Provincial flexibility in wage implementation
- Strong enforcement mechanisms
- Annual monitoring and reporting of outcomes
Under the recommended model, a national minimum wage benchmark would be established while allowing provinces to set higher wages based on local economic conditions and living costs.
PIDE’s indicative provincial benchmarks suggest:
- Punjab: Rs. 45,000
- Khyber Pakhtunkhwa: Rs. 45,000
- Sindh: Rs. 46,000
- Balochistan: Rs. 45,500
The report notes that Sindh’s higher benchmark reflects elevated urban living expenses and a larger formal-sector workforce, while Balochistan’s figure accounts for geographic and market access challenges.
Dr. S. M. Naeem Nawaz, Professor of Economics at PIDE and co-author of the study, stated that an effective minimum wage must be both realistic for employers to implement and enforceable by provincial authorities.
He highlighted that nearly 80 percent of Pakistan’s workforce remains employed in the informal sector, making gradual and practical enforcement essential. The proposed approach would initially focus on government contracts, public procurement projects, and large registered businesses before expanding to small and medium enterprises, agriculture, and domestic work.
The report also stresses that minimum wage policy impacts several areas beyond labour markets, including household purchasing power, poverty reduction, productivity, domestic demand, and social stability.
PIDE cited rising economic pressures as a key reason for reform, noting that average inflation stood at 6.19 percent during July-April FY2026, while food insecurity increased to 24.35 percent in 2024-25 compared to 15.92 percent in 2018-19.
The institute has submitted its recommendations to the Planning Commission for consideration as part of broader efforts to establish a transparent, coordinated, and sustainable minimum wage governance system.
Key recommendations include adopting the Rs. 45,000 benchmark for FY2026-27, introducing mandatory wage compliance requirements in public contracts, implementing phased enforcement across sectors, and requiring provinces to publish annual wage implementation reports to improve accountability and transparency.
