IS Rs12,000 enough as minimum wage? The answer lies with the poverty line, which is estimated as the equivalent of 2,350 calories per adult per day. It was estimated as Rs944 per month for 2005-06. After that, no government publication mentioned poverty line as clearly.

However, economists have individually estimated poverty lines, and the latest, most reliable estimate is Rs1,825.46 for 2010-11. Considering the fact that Pakistan currently has a family size of 6.8 and 1.5 earning members per family, this translates into a monthly income of Rs18,000 (Rs2,647 per person per month). Comparing the poverty line with the newly announced federal minimum wage, it seems as if the cure for poverty has already been discovered.

The question is, do people really earn that much in our country? According to the Labour Force Survey 2012-13, 60pc of employed people earn less than Rs10,000 per month (20pc earn up to Rs5,000 and 40pc between Rs5,000-10,000). Only 22pc lucky employees earn more than Rs15,000 per month. It must be also be considered that only 38.8pc of the labour force earn wages, while 60pc are either own-account workers or contributing family members (vulnerable forms of employment). Who are these 20pc employees who are not even getting half of the minimum wage?

Provincial governments also fix minimum wage rates for different industries in their respective regions. The industries range from 30 in Khyber Pakhtunkhwa and Balochistan, to 40 in Sindh, and 51 in Punjab. Certain new industries need to be brought under the purview of minimum wage law (like the electronic media, if not covered under the Newspaper Employees Act). Similarly, the list of industries also needs to be updated, as there are certain industries that have become nearly obsolete (like bidi making), but for whom minimum wages are still announced.

Minimum wage can help reduce gender pay gap. With higher education levels, women are reducing this gap, but it is still high, particularly in low skilled occupations

The provincial minimum wage boards can also recommend minimum wage rates for domestic workers, i.e. like cleaners, drivers, cooks etc. In India, state governments have fixed minimum wage rates for domestic workers. Our provincial governments should also follow suit.

The status of provincial minimum wage boards is only advisory and the power rests with the provincial government to declare these wages. These recommendations become enforceable only when accepted and notified by the respective provincial governments. These boards should have the right to announce enforceable minimum wages after discussions at their own level.

In case of non-compliance, i.e. non-payment of minimum wages by employers, the law specifies the following penalties: either up to six months imprisonment, or a fine (ranging from Rs200-500) or both, along with the payment of arrears made to the employee. These punishments are too low and need to be revised with stringent penalties to ensure complete compliance with the law.

The overall beneficial effect of the minimum wage is determined by the size of the informal sector and enforcement of the minimum wage. Since the informal sector is 74pc of our economy — thereby depressing the effect of a minimum wage policy —the government’s efforts should be to enforce the law stringently so that workers in the remaining 36pc of the economy — the formal sector — are not deprived of its positive effects.

Compliance with a law is determined by the number of firms visited by labour inspectors and the level of penalties levied in the case of non-compliance. Our labour departments are not only understaffed, but the penalties they can impose on non-compliant employers are too weak as well. Pakistan has ratified Convention 81 on Labour Inspection, and therefore, it should not only properly staff the labour departments, but also amend laws to provide for stricter punishments.

Minimum wages are not publicised properly and thus lack enforcement. Everyone knows about the minimum wage for unskilled workers. However, even labour leaders are unable to get minimum wages for semi-skilled and skilled workers, which are announced by provincial governments at a later stage and are higher than those for unskilled workers.

The publication of a detailed minimum wage notification in the provincial government’s official gazette is not by itself sufficient to ensure that the employer and workers know the newly announced rates. It is proposed that minimum wages should be publicised through print and electronic media. The detailed notifications must also be made available on provincial labour departments’ websites.

The minimum wages is also an important policy tool for promoting gender equality. All over the world, women earn about 70-90pc of what men do. Pakistani women earn around 66pc of men’s wages, according to an ILO Report (2008), however the global gender gap index mention this ratio as 0.55, which is quite low.

Provincial governments should ensure implementation of minimum wages, especially in women-dominated sectors. No provincial government has yet announced minimum wage for domestic workers, which includes a large number of women.

Minimum wage can also help in providing equal pay for work of equal value for both men and women. With higher education levels, women are reducing the gender pay gap, but these gaps are still high in low skilled occupations. According to the Labour Force Survey 2012-13, a female manager earns 90pc of the male wage; a female clerical support worker 72pc of the male wage; and a female with elementary occupation earns only 48pc of the male wage.

Besides, minimum wage should not replace collective bargaining. Even if labour leaders are demanding that the government increase minimum wages, they are used to being crowded out of their efforts/collective bargaining by legislative action by the state. Minimum wage provides only a floor, below which an employer cannot pay a worker. Labour unions should strive to bargain for higher wages because there is no use of collective bargaining when it is requiring the worker to comply with the law only. It is the duty of labour inspectors to ensure compliance with law.

In the end, minimum wage is one of the means to fight against low pay, poverty and inequality. Minimum wage legislation affects only the formal sector workers.

However, to reduce rural poverty, the government should also act as an ‘employer of the last resort’. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in India provides all households in rural areas with 100 days of minimum wage employment per year. After registering and receiving a job card, a rural household can demand work at any time and is provided with employment within 15 days (within a 5km radius of the applicant’s village).

The MNREGA initiative has helped in not only providing minimum wages to workers, but also in improving compliance. Research has shown that a high proportion of female workers have benefited from the programme and it effectively redistributed resources to low-paid workers.

Our government should also start plans like this, instead of wasting billions on National Internship Programmes and the Benazir Income Support Program, which neither give skills to the beneficiary nor enough money for them to survive.

The writer is a Cornell University graduate in Industrial and Labour Relations and is currently working as a Labour Specialist with the WageIndicator Foundation