PIDE proposes hybrid wage-setting model linked to productivity, affordability and worker welfare
The Pakistan Institute of Development Economics (PIDE) on Tuesday proposed raising the national minimum wage to Rs45,000 per month for fiscal year 2026-27 under a new evidence-based framework designed to reform wage determination and strengthen labour market governance.
In its Policy Viewpoint No. 62, titled “Reforming Minimum Wage Determination in Pakistan: From Wage Announcements to Wage Governance,” PIDE called for replacing the existing wage-setting approach with a transparent, rules-based system aligned with principles of the International Labour Organization (ILO).
The proposed framework seeks to balance worker welfare, purchasing power protection, labour market affordability, productivity gains and provincial implementation challenges, according to the study.
Using official data from the Pakistan Bureau of Statistics (PBS) and the Ministry of Planning, Development and Special Initiatives, the institute recommended a national minimum wage benchmark of Rs45,000 per month for FY2026-27. The proposed rate represents a 12.5% increase from the current notified minimum wage of Rs40,000.
Speaking at the launch of the policy viewpoint, Dr. Nadeem Javaid, Vice Chancellor of PIDE and a member of the Planning Commission of Pakistan, said minimum wage determination should move beyond an annual administrative exercise and be linked more closely to economic realities and labour welfare objectives.
“Pakistan now requires a credible wage governance system that balances worker protection, productivity, business sustainability and macroeconomic stability within a transparent institutional framework,” he said.
The report recommends a hybrid methodology that incorporates multiple indicators rather than relying solely on inflation or poverty thresholds. These include worker-family needs, productivity trends, business affordability and labour market conditions.
Dr. S. M. Naeem Nawaz, Professor of Economics at PIDE and co-author of the study, said an effective minimum wage must be both realistic for workers and enforceable by provincial authorities.
He noted that nearly 80% of Pakistan’s workforce remains employed in the informal sector, making compliance and enforcement major challenges for policymakers.
According to the study, a modern wage governance system should promote higher compliance, improve transparency and ensure that minimum wage adjustments are grounded in measurable economic indicators rather than ad hoc decisions.
The proposal comes as policymakers prepare budget recommendations for FY2026-27 amid concerns over inflation, labour market conditions and the purchasing power of low-income households.
