There is growing acknowledgment of macroeconomic stabilisation in recent months. Inflation is down, the current account has posted surpluses for four consecutive months on the back of rising remittances, foreign exchange reserves are growing and export growth, while not spectacular, remains consistent. There is some improvement in real economy figures, such as auto sales and cement dispatches, though overall economic growth is still well below par.

Beyond big numbers and the debate on whether they deserve cautious praise or considered caution, it’s worth reflecting on what the past few years meant for the average Pakistani household. Between July 2019 and June 2024, inflation came in under 10 percent in fewer than one-third of all months. It reached astronomic highs above 20 percent consistently between July 2022 and January 2024, decimating consumer spending power by at least half. The World Bank estimates an additional six percent of all households—nearly 15 million people—were pushed into poverty during this period.

Poverty brings with it a host of other burdens. Caloric deficits become common as spending on meat, fruit and vegetables goes down; children are withdrawn from fee-paying schools, slowing down human capital accumulation; physical well-being is impacted by curbs on health expenses.

The actual scale of these burdens is yet to be determined. Since the Labour Force Survey of 2021, the Pakistan Bureau of Statistics has not published any national-level study that can help assess the damage and the extent to which household earnings have lagged inflation. Another usual benchmark, the Pakistan Social and Living Standards Measurement, last came out in 2019.

As others have pointed out, the social and political consequences of inflation are already apparent. The PTI’s political upsurge and the mass realignment of voters in urban Punjab, culminating in the 2024 election results, is the most obvious one. The continuing legitimacy crisis on digital media confronting the government and the establishment is another one. Anecdotally, the uptick in legal and illegal migration and disillusionment among white- and blue-collar workers alike are all wreckages from the same crisis. This small window of low inflation should compel a rethink of how the authorities and employers understand the average household’s basic needs.

The task at rebuilding an economy that works for the majority and can undo the damage of the past few years is an enormous one. Existing social protection efforts, such as cash transfers through BISP and subsidies at the provincial level, are inadequate. Poorly implemented, randomly assessed and below-par minimum wage regulations consistently come up short as well.

This small window of low inflation should compel a rethink of how public authorities and employers understand the average Pakistani household’s basic needs. One alternative proposition is the ‘living wage’ framework, empirically proposed in Pakistan by researchers Kabeer Dawani and Asad Sayeed.

The case for a living, rather than minimum wage, is fairly straightforward, existing minimum wage regulations are inadequate and arbitrary and do not cover the actual cost of a decent life for a household in Pakistan. Instead, a new conception is required that can cover a low-cost nutritious diet, basic but acceptable housing and other non-food, non-housing essentials such as clothing, healthcare, transportation and education. Given how the cost of living varies between different locations, the living wage will be different for different regions.

In the latest iteration using inflation data from March 2024, Dawani and Sayeed draw up estimates for rural Khyber Pakhtunkhwa (KP) and both urban and rural northeast Punjab. The gross living wage comes in at around Rs67,000 for rural KP, Rs45,000 for rural northeast Punjab and Rs51,000 for urban northeast Punjab.The same figures for April 2021 were Rs35,000, Rs16,000 and Rs20,000 respectively. In three years, the benchmark amount required for decent living has nearly doubled or more across different parts of the country.

Updating Labour Force Survey data from 2021 to the present, the authors show that in most basic occupations, workers are making considerably less than their estimated living wage. In some cases, such as for unskilled construction workers in Punjab, the difference is as much as Rs25,000 per month.

Egregiously, official minimum wage benchmarks also fall considerably short if measured against this benchmark. In other words, even if minimum wage laws were enforced across all sectors, many workers in elementary occupations would still not be making anywhere close to what they actually need. As the authors rightly argue, the only viable short-term solution to reduce the living wage gap is a reallocation of wasteful subsidies from non-poor to poor households in the shape of expanded cash transfers.

Alongside short-term interventions, there needs to be a conclusive acknowledgment of the human cost of Pakistan’s repeated boom-bust cycles. In the past few weeks, Khurram Husain’s writings have alerted us to the possibility that in the quest for a quick win, the government may soon shift its focus from stabilisation to growth. As he has rightly cautioned, in the absence of any meaningful change in domestic productivity, the pursuit of growth through easing up of import controls, provision of subsidised credit, or suppression of energy prices may result in the economy heating up again, leading to another bout of high inflation.

These cycles do not impact rich, asset-holding households to any great degree. In fact, the rich make money during both booms and busts. When growth is high, there is money to be made from business activities, real estate and the stock market. When growth crashes and inflation goes up, business owners pass on the cost to consumers and those with excess savings switch to debt-based instruments to make use of the higher interest rates. In all instances, it is common households that bear the brunt of a crash and the stabilisation that follows. And if political realities and public anger are anything to go by, the population’s ability to scrape through another bust is at its end.

• —Dawn (Pakistan) / ANN