The demand to increase wages comes up whenever the cost of living increases. Every factory, office and collective bargaining agent starts making hues and cries for increment. Sometimes, through sit-ins in front of respective factories/offices or government officials concerned that even lead up to chaos and violence.
When government raises the wages of their employees, private sector employees have to bear the brunt of the said increment thereby further compounding inflation. The government also announces a revised pay structure for the private sector by fixing the minimum wage limit for labourers. Punjab and Sindh governments have wage boards to look after such matters. Special boards exist for specific sectors to grant an increase in wages.
This begs the question whether increasing wages help people combat inflation, or is it just an added burden on the government & private exchequers?
Whenever government employees got a raise, the cost of living also increased, nullifying the positive effect of the decision. An increase in wages of private sector employees depends on the discretion of company owners.
Nowadays any possible increase in wages of government employees is disclosed much earlier than announcing it while presenting the budget, which is a breach of trust and confidentiality.
In my career of over five decades, I have never seen anyone getting prosperous due to the increase in wages. Prosperity comes only when the person gets an increase in wages that brings their income over expenditure. Of course, it happens once in a blue moon and is subject to extraordinary performances.
An increase in wages also hikes organizations’ expenditures. Subsequently, prices of commodities also go up and the same employee bears the burden. Some people advise curtailing the expenses. Would it help combat inflation? Not at all! As expenses could be lowered to some extent only.
Avoiding raise in wages will benefit governments, trade, and industrial organisations but also help people live within their limits and promote savings for investment and reap benefits. According to the World Bank, gross savings to the GDP was 13.92 per cent only in 2021. Government should also cap the dollar prices in both the open and inter-bank markets.
Oil marketing companies can freeze the prices of petroleum products for the next five years. Subsequently, energy-producing companies and the fertiliser sector should be asked to fix their prices for the next five years too.
Governments should also try to create “ease of doing business” for all sectors and ban the import of luxury items. Rates on savings schemes should be raised to an attractive level.
If the governments do not take such measures, the vicious circle of the “give this hand, take that hand” would continue. Economy and financial experts may be consulted to get more solid ideas on the subject.
Ali Siddiqui
Karachi
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