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Pakistan’s Wage Structure, during 1990-91–2006-07


  • Mohammad Irfan

    (International Islamic University, Islamabad)


This paper attempts to document changes in the wage levels of different categories of workers employed in various segments of the labour market during the period 1990-91–2006-07, according to the information given in the labour force surveys. Wage structure can be analysed from different angles. Here we look at the levels and trends in the broad categories of industry. Further subdivided along the demarcation of formal/informal, and by worker characteristics such as age, sex, education, and occupational categories. Largescale Manufacturing Industries, Banking Sector, and Civil Servants’ salary structure are subjected to investigation for disuring wage trends in the formal sector. The impact of unionism and of the labour and wage policies of various regimes and upon wage outcome is also assessed. There appears to be a consonance between money wage growth at the aggregate level of the economy and GDP growth. The former registered a positive growth, with the exception of the 1999-2002 period, when the latter had low growth. Time trend of average wage works out to 7.6 percent, which, adjusted for inflation, yields a 0.7 percent trend growth rate in real wages for the 1990-07 period. Real wage growth rate at the aggregative level is characterised by substantial diversity. One finds an inverse relationship between the level of wage rate and real wage growth. Thus workers in the informal sector and commodity producing sectors like Agriculture and Manufacturing suffered a real wage decline during the period under study. That the real wage gains were denied to the majority of the workers (60 percent or so) lying at the lower rung of the wage distribution rendered the wage structure iniquitous wherein duality further accentuated. The character of the regime tends to have its mark. During the 1990s, the political leadership notwithstanding, low GDP growth and Pressler Amendment appeared to have sympathetic attitude towards labour, which was visible in the virulence of trade unions as well as announcement of the Minimum Wage Policy during early 1990s. However, in the context of labour supply pressure and subdued economic performance, stagnation and decline in real wage could not be avoided. In contrast, there hardly has been any sizeable positive impact on the real wages of the informal sector workers since the turnaround of the economy in 2003. The governmental attitude was reflective of the follow-up of the imperatives of globalisation, weakening of trade unions, and introduction of the changes in the procedures governing the tripartite mechanism and formulation of labour and wage policy. The need to have a fresh look at the labour and wage policy to ensure sustenance and to address inequality issues can hardly be overemphasised.

Suggested Citation

  • Mohammad Irfan, 2009. "Pakistan’s Wage Structure, during 1990-91–2006-07," PIDE-Working Papers 2009:54, Pakistan Institute of Development Economics.
  • Handle: RePEc:pid:wpaper:2009:54

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    References listed on IDEAS

    1. Amjad, Rashid, 2006. "Employment strategies and labor market policies: interlinkages with macro and sectoral policies," MPRA Paper 39177, University Library of Munich, Germany.
    2. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
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    4. Abid A. Burki & Shabbir Ahmad, 2007. "Corporate Governance Changes in Pakistan’s Banking Sector : Is There a Performance Effect?," Governance Working Papers 22251, East Asian Bureau of Economic Research.
    5. Azizur Rahman Khan, 1967. "What Has Been Happening to Real Wages in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 7(3), pages 317-347.
    6. World Bank, 2002. "Globalization, Growth, and Poverty : Building an Inclusive World Economy," World Bank Publications - Books, The World Bank Group, number 14051, December.
    7. Bushra Yasmin & Aliya H. Khan, 2005. "Trade Liberalisation and Labour Demand Elasticities: Empirical Evidence for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 1067-1089.
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    Cited by:

    1. M. Ali Choudhary & Saima Mahmood & Sajawal Khan & Waqas Ahmed & Gylfi Zoega, 2013. "Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," School of Economics Discussion Papers 0213, School of Economics, University of Surrey.
    2. G. M. Arif & Nasir Iqbal & Shujaat Farooq, 2011. "The Persistence and Transition of Rural Poverty in Pakistan: 1998-2004," PIDE-Working Papers 2011:74, Pakistan Institute of Development Economics.

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    More about this item


    Wages; Wage Structure; Pakistan;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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