EDITORIAL: The government has settled the raise in pay dispute with protesting employees before the matter degenerated any further. Defence Minister Pervez Khattak, flanked by Interior Minister Sheikh Rashid and Minister of State for Parliamentary Affairs Ali Muhammad Khan, announced at a press conference that a 25 percent increase in the salaries of federal government employees between grades one and 19 had been approved on an “ad-hoc basis”. The increase would be added to relevant pay scales in next year’s budget that will be announced in June. But the government broke the ice only after turning the capital into a battleground the day before, which saw police tear-gas, baton-charge and arrest hundreds of protesters begging for a rise in their salaries. It looked, with very good reason, that the government’s response was meant to relay a clear message that it would not be dictated to, which is why the quick de-escalation was all the more welcome.
Official accounts seem to indicate that the only fault of the protesters, in addition to not waiting for the government to make up its mind on its own of course, was not restricting themselves to the area designated for their purpose. Still, such a harsh response, especially since nobody was breaking the law in any way, was clearly uncalled for and a delayed realisation of the fact on the part of the government seems to explain the interior minister’s presence at the presser. Yet even though the government’s decision to express regret over the handling of the protest is appreciated and everybody went home happy, it’s not as if the pay rise is really going to solve anybody’s problems in the long run. Because now that official salaries will rise, a similar upward push in pays sweeping through industry and the private sector is inevitable. The government would have to raise the minimum wage and the private sector would have to factor increments across the board into input costs.
This trend will set in just when the little latitude that the coronavirus fallout provided to the economy, in terms of diverting from the strict demands of the International Monetary Fund (IMF) because of the bailout programme, will end. Already the government is jacking up power tariffs and gas rates to get the Fund to release the next tranche. So the low-growth and low employment cycle, complete with all the problems it is known to bring to the working class, is going to be locked-in for quite a while and the government’s inability to do much about inflation in essential items isn’t helping anybody at all. That explains the desperation for higher pays and the ruling party’s decision to eventually cave in.
But putting more money in people’s hands, necessary though it seems, is still not the smartest way to deal with the problem when growth is low and inflation is still on the high side. For there is no situation more fertile for more inflation than more money chasing the same goods in any economy. After all, there can only be so much to celebrate about a pay rise if the increment just disappears at the grocery store. This is no doubt a very vicious circle and things would not have come to such a pass so quickly if, as so often wished in this space, the government had reached a better deal with the IMF. There’s no denying the need for all the “reforms” that must be carried out to keep the loan on track, but they could still have been stretched over a longer period of time to dampen their impact on the people at large. But since the Fund refused to relent even though the government tried and there’s no way to wriggle out of all the conditions, the focus must now be on stimulating production, exports and growth because the nightmare scenario of stagflation – low growth and high inflation – must be avoided at all costs.
The last thing the country, or workers that are about to receive a healthy bulge in their paychecks, needs is to default on the IMF programme, its restrictions notwithstanding; for that would bring a lot more people out on the streets than the posse of protesters that got together on Wednesday and unnerved the government enough for it to opt for such strong use of force. It can only be hoped that the prime minister’s advisors would have briefed him about the cost of the more than the required concession that his government has just made and the further inflation due to the cycle of pay rises that this will engender.
Copyright Business Recorder, 2021