The Delirium of Income Equality – Journal
Saeeda, a part-time maid, has never had it easy. It has always been difficult for her to support her family and the fluctuating meager income of her husband Moin, a freelance house painter.
Now, with high inflation, the family income is insufficient to cover their basic needs. She wanted her employer to provide her with a monthly ration in addition to her salary. Their refusal deeply embittered her.
“We also deserve to live. What did it matter to them that they could spend more on their pet’s bedding than my monthly ration costs? After working hard, the idea of children sleeping hungry is horrifying. This is so unfair,” she muttered to the writer.
Unfortunately, Saeeda’s story is not special. There is a growing awareness and resentment among workers towards income disparity.
The UNDP estimates that the economic privileges of the elite amount to Rs3.6tr or about 6% of Pakistan’s economy
The denial in the official quarters therefore seems delusional. Senior levels of relevant ministries have insisted that the rich-poor gap in Pakistan has been gradually narrowing since 1998-99.
They shared their concerns about pay gaps within their ranks and with their peers in the private sector, but had no idea about pay ratios in the public and corporate sectors.
The salary ratio is the ratio between the highest and lowest salaries in a company. A high wage ratio is seen as a contributing factor to increasing income disparities in a country. As global concerns grow about inequality and its impact on growth and political stability, many developed countries are forcing companies to disclose their pay ratios to better manage the problem.
Hard data is not available, but careful observation suggests that wage ratios are significantly higher in the private sector than in the public sector in Pakistan. Pakistan’s Security Exchange Commission was asked for comment on the salary ratios, but did not respond before this report was filed.
The current economic survey has summarized the comments on inequality in three paragraphs and a table in the chapter on social security initiatives. He says: “Over the years, the pattern of income distribution in Pakistan, measured in terms of Gini coefficient and household income share of the lowest and highest 20% for rural and urban areas, was mixed and moderate.
“The Gini coefficient of household income has been around 0.35 or less since the 1960s, reaching 0.407 in 1990-91, 0.410 in 1998-99, and after that it started to decline due to the improvement in the poverty situation and reached 0.30 in 2018-19 as against 0.33 in 2005-06”.
The government has attributed a fairer distribution of income to “well-targeted poverty reduction programs”.
Reaffirming the government’s position, Dr. Imtiaz Ahmed, Joint Economic Advisor, answered the question as follows: “The required data is not available on the wage ratio in Pakistan. Based on the assessment of the Gini coefficient, the gap between rich and poor has narrowed. In rural areas, the Gini coefficient increased from 0.266 in 2015-16 to 0.248 in 2018-19, while in urban areas it increased from 0.356 in 2015-16 to 0.328 in 2018-19”.
He acknowledged that Covid-19 had a differential impact on different segments. Coming to the defense of the government, he added, “the government is taking steps to improve income distribution.” He said government policies of targeted cash grants during Covid-19 and beyond have reduced the “disparity between haves and have-nots”.
“Efforts have been made to make the economic rebound more inclusive, which can be seen from the rising per capita income in the country.”
Dr Hafiz Pasha, a former finance minister, reportedly dismissed the government’s narrative on the disparity when he said the overall share of the poorest income quintile is 14.2% compared to 37.2% of the poorest quintile. rich.
UNDP’s National Human Development Report 2021 highlighted the high income inequality and elite economic privilege in Pakistan – the corporate sector, landed aristocracy, military and political hierarchy. The estimated cost of these favors is expected to be 3.6 trillion rupees ($17.4 billion), or about 6% of Pakistan’s economy.
The corporate sector has been identified as the biggest beneficiary of privileges in the form of tax breaks, cheap input prices, higher output prices or preferential access to credit, land and services. services. The richest 1pc who collectively owns 9pc of Pakistan’s income is second. Feudal lords, the 1pc of the population who own 22pc of all arable land, rank third. While the military with huge business, public works and real estate interests receive 355.3 billion rupees ($1.7 billion) in privileges, are next.
The richest 20% command 50% of the national income while the poorest 1% hold only 0.15% of the national income. The report also highlights regional inequalities in service delivery, with higher income areas receiving higher public spending.
Responding to the question why old data from 2019 was used in the current survey, Dr Naeem uz Zafar, Chief Statistician, Pakistan Bureau of Statistics, said: “The latest PSLM [Pakistan Social and Living Standards Measurement] is 2019-2020, after which we focused on the census and paused the surveys until the census fieldwork was completed.
Another senior official source said that “multiple factors are responsible for the huge wage ratio differential, a global phenomenon that is not limited to Pakistan.” He believed that a combination of factors, including worker skills and productivity, played a key role in determining the ratio of wages across the economy.
Nasim Beg, a senior executive associated with the Arif Habib Group of Companies, said he was told in Japan that a freshman graduate had been inducted there at one-tenth of the CEO package in a trading company.
“In Pakistan, an entry-level MBA fetches between Rs 50,000 and 100,000 in an industrial company compared to Rs 2.5 million for CEO with all benefits monetized. An engineer can enroll at Rs35,000 to Rs50,000. The minimum wage is 25,000. That’s a ratio of 1:100.
Responding to the question how members of the Overseas Chamber of Commerce and Industry will react if the Securities & Exchange Commission of Pakistan (SECP) changes the rules to make wage ratio reporting mandatory, its secretary General Abdul Aleem said, “We will abide by the regulations. This will help to better understand the current parity between the different levels and hopefully lead to proper rationalization. But I presume that the SECP can only run companies listed on the stock exchange”.
Leaders of the Pakistan Business Council and the Federation of Pakistan Chambers of Commerce and Industry and relevant ministers did not respond on the matter before the report was tabled.
Posted in Dawn, The Business and Finance Weekly, June 27, 2022