Introduction

CY2022 has not been an easy year for Pakistanis. Inflation averaged above 20 percent during the calendar year, despite the much-reviled freeze on energy prices during the first part of the year. As the news flow and forecasts focus on the need for austerity and more belt-tightening during 2023, BR Research showcases what recent years have been like for daily wagers.

The analysis compares two sets of data to arrive at a proxy for long-term trends in purchasing power: one, monthly national average prices of kitchen essentials published by the Pakistan Bureau of Statistics as part of the Sensitive Price Index (SPI). Two, the national average daily wage is calculated using the wages for various skilled and non-skilled workers collated by PBS; that is, the average wage of the following professions: laborer, mason (Raj), plumber, carpenter, and painter.

A comparison is then drawn by calculating the ratio between the retail price of each kitchen essential category, and the national average daily wage.

Based on PBS data, the average daily wage has increased from Rs571 in January 2012 to Rs1,356 in December 2022, an increase of 2.37 times over a span of 11 calendar years (or 132 months).

Analysis

During the 11-year period under review, an average Pakistani daily wager witnessed two major trends. The first trend lasted between December 2013 and September 2018, when an average household should have witnessed improvement in its food security as measured by the affordability of various kitchen essentials.

For example, the ratio of a kg of wheat flour to daily wage rose from 16 times to 26 times; broken basmati rice from 9 times to 14 times; of a dozen farm eggs from 5 times to 12 times; of fresh milk from 9.5 times to 12 times; and, for edible oil from 3 times to 5 times. Other than mutton and some pulses (which are imported), daily wagers saw the affordability of all kitchen essentials improve during this five-month period, which coincided with the global oil price crash and historically low inflation at home as a result.

In arithmetic terms, this means that a daily wager who could afford only 3 liters of cooking oil on his daily income in Dec-13, could afford 5 liters by the end of 2018. Of course, in real life, improved affordability does not mean more consumption. However, it could mean that when food security improves, it frees up more space for expenditure on other amenities of life such as education, medical treatment, or utilities.

Post-2018, daily wagers have witnessed a massive erosion in purchasing power, if retail prices of kitchen essentials are anything to go by. Today, an average daily wager can afford a lower quantity of flour than he did back in January 2012, fewer farm eggs, less fresh milk, fewer kilos of chicken meat, barely the same kgs of rice and pulses such as moong, and far fewer liters of cooking oil. The only exception is refined sugar, where affordability has in effect improved, despite the rise in the absolute price of the commodity.

The increase in the price of any good or service need not imply that affordability has declined if the rise in income takes place in tandem. Of course, that has not been the case as also noted by the rise in Pakistan’s labor competitiveness in the export market (ergo, labor has become cheaper). But does it necessarily mean more people are at greater risk of food insecurity and malnourishment?

There is of course no direct way to prove the argument. However, if prices of other services such as utilities, fuel, transport, schooling, house rent, or medical treatment had grown by a significantly lower quantum, it may free up more financial space to spend more on essentials. However, neither has been the case. A typical daily wager then faces Sophie’s choice: cut expenditure on fuel to work; children’s schooling; shift to cheaper housing; or, reduce expenditure on the kitchen. And as purchasing power erodes over a stretch of five year period– marked by intervening periods of layoffs, lockdowns, floods, and indebtedness, that forebodes a society at the brink of malnourishment: lower fats consumption, lower protein consumption, and ultimately, less calories altogether.

Conclusion

Although Pakistan’s poor fiscal management is beyond the pale and definitely needs serious introspection and course correction, stakeholders must appreciate what the inflation over the past five years - and especially over the last year – has meant for those at the bottom of the income pyramid. Floods, global commodity price spiral, political upheaval, pandemic, and five years of severe currency depreciation have in effect wiped out the purchasing power of the most vulnerable communities, who can afford fewer rotis today than a decade earlier. And while social protection programs such as BISP and Ehsaas may be helpful, these fail to reach the vast swathes of the affected populations. The tremendous escalation in prices of kitchen essentials may have put many more at risk of food insecurity and malnutrition, especially at a time when the specter of job losses and mass layoffs looms ahead.

The state must do more, but vulnerable communities also need action from both private citizens and business groups. More importantly, the international community and partners must also look closely before imposing more austerity on a country facing default. Ruling classes may have slipped up, but Pakistanis are in dire need of help.