The sense of alienation and resentment among regular working families in Pakistan has deepened due to unjust treatment by employers and the government. Higher tax deductions from already low salaries have exacerbated the situation. In August, they will receive their first salary post-Budget 2024.

Their bitterness is not misplaced, as new evidence confirms how the challenging job market and the lack of effective recourse to address grievances discourages workers, adversely affecting their productivity levels.

Salaried Pakistanis earn less than their counterparts in other countries but face higher income taxes across all income brackets. Unfortuna­tely, there is no comprehensive horizontal or vertical salary analysis across all professions based on verifiable national data in Pakistan.

Informal research, in the absence of relevant data, has failed to identify sector patterns. Civil servants’ perks and privileges further obscure the picture, making it difficult to estimate their remuneration accurately and objectively compare salaries between the public and private sectors.

Salaried individuals in Pakistan suffer the brunt of taxation policies as SMEs employing the largest workforce segment are unorganised and poor pay masters

The general perception, supported by some economists and businessmen, is that lower-level government employees, with job security, limited working hours, pensions and other benefits, earn more than their peers in the private sector.

In reality, this salary gap narrows for government officers of Grade 16 to 17. For Grades 18 to 20, the difference diminishes further, except for those in financial institutions, tech companies and multinationals who are paid higher salaries. At senior government levels, Grade 21 to 22, civil servants’ monthly salaries are only a fraction of what board members of many private companies in the formal sector earn.

However, a 2021 study by the Pakistan Institute of Development Economics (Pide) called ‘Cash Poor, Perk Rich’ challenges this perception. The Pide study shows that the actual value of what bureaucrats receive is many times higher than their nominal salaries, which are more like pocket money.

Government-provided housing, house help, transport, health care and travel, which encompass many of their needs, are covered. In the informal sector, the situation is even more chaotic and anti-worker.

“The World Bureaucracy Indicators of the World Bank estimate that the public sector wages in Pakistan are 53 per cent higher when compared to the private-sector wages,” the Pide report states. Attempts to obtain the government’s input about the matter were unsuccessful, as even senior officials, including cabinet members, were unclear about who is responsible for salary structures.

Federal Planning Minister Ehsan Iqbal believed the matter fell under the purview of the federal finance ministry, while officials in the finance ministry suggested that the Establishment Division (ED) or Services and General Administration Department (S&GAD) handle these issues.

Higher-ups in these services clarified that their responsibilities are limited to government employees and they do not cover general salary standards for the private formal and informal sectors.

They further indicated that the Labour Survey might provide information on workers and their salaries, which, though it is supposed to cover this topic, is a weak document.

In an interview, a former chief statistician explained that surveyors ask people of employable age if they are seeking a job, and a negative response is assumed to indicate employment. While the Pakistan Economic Survey reports an 8pc unemployment rate, even officials from the Pakistan Bureau of Statistics acknowledge that joblessness is widespread.

Findings, reported in media, from the Global Index produced by Numbeo — a Serbia-based technology company — ranked Pakistan 94th out of 96 countries, with an average after-tax monthly salary of $184, just above Egypt (95th) and Cuba (96th).

Switzerland tops the list with an average monthly salary of $6,782. India, with an average salary of $620, is ranked 61, while Bangladesh, Nepal and Sri Lanka are ranked 90th, 91st and 92nd, respectively.

A more rational taxation rate on the salaried population in Pakistan could not only aid working families but also potentially improve the country’s standing in the aforementioned index. The Pakistan Business Council (PBC) posted a brief on social media highlighting the issue, a situation that worsened after the 2024 budget.

The PBC released a comparison table with neighbouring India, underscoring the absurdity of Pakistan’s taxation policy. The table shows the tax liability for different income brackets in both countries, revealing that in Pakistan, taxes are higher by up to 3 times.

Rashid Amjad, former Vice Chairmen of Pide, remarked, “Despite the current debate on falling real wages, there is no study on recent wage trends due to a lack of reliable data. The comparison of mid-career incomes between the private and public sectors varies.

“In banks, multinational corporations, foreign-owned companies, and large business houses, the private sector pays better. In mid-sized private firms, it’s a closer tie, with significant diversity across companies,” he said.

Chaudhry Muhammad Saeed, former president of the Federation of Pakistan Chamber of Commerce and Industry, criticised private companies in Pakistan for operating like serfdoms and failing to adopt a corporate culture. He noted that company owners act like slave masters without accountability, which hampers business growth.

This feudal mindset deters the private sector from attracting and retaining talent. As a result, bright individuals from humble backgrounds aim for civil service, while resourceful well-educated citizens often join multinationals or move abroad.

Financial consultant Asad Ali Shah noted that government jobs offer better pay, benefits and job security for low-level staff, regardless of performance. In contrast, the private sector, excluding multinationals and including banks, telephone companies, and oil and gas companies, generally pays less and demands more.

The corporate sector tends to offer higher salaries for mid-level staff. However, medium and small enterprises, which employ the largest workforce segment in Pakistan, are unorganised and poor paymasters.

There are exceptions though.

Dr Usama Ehsan Khan, Research Head at the Policy Research and Advisory Council (PRAC), remains unconvinced. His experience has led him to value forward-thinking companies that recognise and support talent, unlike the government. He chose a private sector position over his government job for this reason.

Published in Dawn, The Business and Finance Weekly, July 29th, 2024