Squaring circles

THREE people, who earn around Rs40,000 a month, approached me for help recently. Their electricity bills were Rs54,000, Rs24,000 and Rs23,000. I am sure there are many more facing a similar predicament.
A number of workers, from various organisations, have told me that though the minimum wage has been increased to Rs37,000, their organisations do not pay them this. They are afraid to complain as they might lose their jobs. And though they stand exploited, they cannot afford to lose their jobs.
Many people — in organisations I work for or those that I am familiar with — have asked their managements if they could work from home some days a week. Commuting costs have escalated and few organisations provide transport. Pakistani organisations are still a bit inflexible in terms of schedules, and making adjustments to facilitate working from home is still relatively rare.
The grocery bill for most households has gone up substantially. A friend, from the upper-middle-income strata, mentioned that his monthly bill had gone up by at least 50-60 per cent over the last two years. He has started shifting away from products whose prices have risen more than the average and is substituting with mostly local products. But he does worry about quality issues. The continuing inflation of the last few years has been very testing for most.
A number of colleagues, working across a variety of organisations, have said their July take-home salaries, despite increments of 10pc-odd this year, have been lower than what they were in June of 2024. The impact of new taxation measures on salaries has been significant.
All this is squeezing incomes. And this is happening across a wide spectrum of people. It hurts more if incomes are fixed or decreasing for those who get returns on fixed deposits, for the salaried — their incomes only go up once a year, if that, and usually the increase is below inflation rates — and for those who cannot pass on the price and tax increases to their customers (in some businesses it is possible to pass on the hikes, partially or fully, to customers, in others it is not). The degree of the squeeze might vary, unless you are very rich or are in an industry/area that is growing fast, and there are few of those around right now, but for most people it is likely that their income is being squeezed.
For some the squeeze has been brutal to the point that their income is no longer sufficient for covering household expenses. These people are resorting to dipping into their savings, if they have any, or have started borrowing. One colleague has borrowed a major portion of next month’s salary to pay the electricity bill. She has told the employer to ‘adjust’ the amount in instalments over the next three to four salaries. This means she will have a reduced income for some months to come. I am sure there are countless others in a similar situation. Inflation is not abating, and even if inflation goes down to the single digits, as an optimistic finance minister has predicted, it does not mean that prices will decrease but that they will increase at a slower rate. How is a reduced income going to be enough for the next few months?
Others have resorted to selling assets or household items. One colleague has sold his motorcycle. His commute to work has become much more difficult, unpredictable and time-consuming now. He is desperately hoping that he is able to hold on to his job.
Others have been asking for help from those they can. Many colleagues at organisations where I work have told me about requests for help with the payment of electricity bills and fees for children’s schooling.
It is little comfort for us to hear the finance minister or other ministers say that Pakistan has been successful in getting another IMF programme and that we are heading towards stability. How is the macro news, even if it is good, going to impact the micro stories of people’s lives? Their incomes are not going to increase for the foreseeable future, nor are taxes and other tariffs going to come down. What should we do with the news of stability and improvements in our macro situation if it does not impact our micro conditions, or is not expected to for some years to come?
The government has increased the minimum wage from Rs32,000 to Rs37,000. But is this a livable wage? We know it is not. Even more importantly, we know other than a few documented industries and larger corporations, few give minimum wages to workers. Domestic workers, most of them security guards, office staff, sanitation workers, gardeners, delivery workers and industrial/ factory workers, do not get a minimum wage. We know most teachers, especially working in private schools (other than those in high-fee schools), do not get minimum wages. It is great that the government has raised the minimum wage, but if it is not implemented for everyone, it will only benefit a small number of workers.
What can people do under these circumstances? Not much. It is hard to get a second job or change jobs in the conditions we are in. Expenditures can only be reduced to a certain extent. The fear is that people will cut down on expenditures that are important for the future — on healthcare and education. This will hurt them and the entire country in the medium to long term. We already have 26 million five-to-16-year olds out of school. If more children are pulled out of schools, it will be a disaster for us. Forty per cent of our children are already malnourished; if people try to skimp on food and healthcare, it will impact generations to come. Unfortunately, a very large number of Pakistanis may not have any options.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
Published in Dawn, August 2nd, 2024