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Estimating a Living Wage in Pakistan

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Kabeer Dawani's talk at the Review of 2015-16 National and Provincial Budget: Creating spaces for the vulnerable and poor in society.

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Estimating a Living Wage in Pakistan

  1. 1. Estimating the Living Wage Kabeer Dawani Collective for Social Science Research, Karachi
  2. 2. Living Wage • Living wage is recognized as a right by the international community. It is also included in the United Nation’s Universal Declaration on Human Rights and the ILO’s constitution. • Although, there is no consensus on its definition, all definitions have the following in common: a living wage should support a worker and his or her family with a basic living standard that is decent and appropriate to the society and times.
  3. 3. Living Wage Estimation in Pakistan • A Minimum of two and maximum of 6 estimations of Living Wage have been done, depending on the size and diversity of countries. • We are in the process of doing Living Wage Estimation for Fair Trade Certified Companies manufacturing footballs in Sialkot. • Includes Urban, Peri-Urban and Rural Areas. • This Work will only be representative of small urban and rural north Punjab.
  4. 4. Methodology • A number of methodologies have been used to determine the living wage in the past, with varying degrees of rigour and appreciation of the local context. • This study uses a new methodology developed by Richard and Martha Anker, more rigorous than previous ones and provides intra-national and cross-national benchmarks. • The methodology uses a mix of secondary data and primary data. • There are four components of a living wage in the Anker methodology: 1. Food costs, i.e. Nutritious low cost diet 2. Housing costs 3. Non-food non-housing costs (education, health, transport, recreation and culture) 4. A 5% buffer for emergencies
  5. 5. PART I. FAMILY EXPENSES Local currency USD Food cost per month for reference family (1) Food cost per person per day Housing costs per month (2) Rent per month for acceptable housing a Utilities and minor repairs per month Non-food non-housing costs per month taking into consideration post checks (3) Preliminary estimate of non-food non-housing costs Health care post check adjustment Education post check adjustment Transport post check adjustment Additional 5% for sustainability and emergencies (4) Total household costs per month for basic but decent living standard for reference family (5) [5=1+2+3+4] PART II. LIVING WAGE PER MONTH Living wage per month, net take home pay (6) [6=5/#workers] Mandatory deductions from pay (7) (list these in notes to table, e.g. taxes) Gross wage required per month for Living Wage (8) [8=6+7] WHEN LIVING WAGE STUDY HAS AN INDUSTRY FOCUS COMPLETE PART III PART III: LIVING WAGE IN INDUSTRY CONSIDERING VALUE OF TYPICAL IN KIND BENEFITS AND CASH ALLOWANCES IN INDUSTRY Value per month of common in kind benefits in industry (9A) (list in notes to table) Value per month of common cash allowances in industry (9B) (list in notes to table) Living Wage take home pay in industry, when workers receive typical in kind benefits and cash allowances in industry (10) [10= 6-9A-9B] Living Wage gross pay in industry if worker receives typical in kind benefits and cash allowance in industry (11) [11= 8-9A-9B] Summary Table
  6. 6. Secondary data • Using secondary data from HIES and PDHS, we determined the following: – Using family size data, fertility rates and mortality rates, we arrived at the average family size = 5.4 – Using labour force participation rates, unemployment rates and part-time employment rates we arrived at the number of full-time workers per family = 1.6 – Local housing conditions – Proportions of household expenditure by category
  7. 7. Major expenditure group (change if necessary) Secondary data Adjustments Sub-major expenditure group (change as necessary) % Expenditure in secondary data Adjustments explanation % after adjustment Food Food & non-alcoholic beverage 44.44 None 44.44 Alcohol (if included in food group) - Put into alcohol & tobacco major group & use 0 here 0 Tobacco (if included in food group) .94 Put into alcohol & tobacco major group & use 0 here 0 Meals away (if included in food group) - Put part* of this into restaurants & subtract this part here Cooking fuel (if included in food group) - Put into housing & use 0 here 0 TOTAL FOOD 43.5 43.5 Housing Actual rentals, imputed rentals, maintenance, other housing expenses 25.32 (WHEN cooking fuel was in food group) Add amount to amount for housing. 25.32 Alcohol & tobacco Alcohol - (WHEN alcohol was in food group) Add here. Reduce if excessive. (WHEN alcohol was here) Put same amount here) Tobacco - Exclude 0 Restaurants and hotels - (WHEN meals away was in food group) Add part here (see notes below). (WHEN meals away was here) Put part in food group & subtract this here (see notes below) Clothing and footwear 5.48 No adjustment 5.48 Household contents and appliances .43 No adjustment .43 Health 3.05 No adjustment 3.05 Education 3.28 No adjustment 3.28 Transport Private vehicle purchases 0.00 Subtract part of this when workers expected to exclusively use public transport (see notes below) 0 Private vehicle operation .36 .18 Public passenger transport 3.50 No adjustment 3.5 Communication 1.82 No adjustment 1.82 Recreation & culture .99 No adjustment .99 Miscellaneous goods & services 4.05 No adjustment 4.05 TOTAL NFNH 23.02 22.84 Source: HIES 2011-12 Household expenditures
  8. 8. Food Costs • Model diet based on secondary data – Purchased grams vs. Edible grams – Edible grams into calories based on USDA standards – Minimum standards of carbohydrates, proteins and fats to be met • Primary data from food market surveys to be entered to calculate cost for the model diet
  9. 9. Model Diet – Inputting purchased grams from secondary data
  10. 10. FOOD GROUPS FOOD 1.A Cereals and grains Wheat Rice 1.B Prepared cereals Bread (for example: bread and noodles) 2.A Roots and tubers Potato (for example: potato, cassava) Onion 2.B Starchy fruit or vegetable 3. Pulses, legumes, beans Beans (for example: legumes, beans, nuts) Lentils 4. Dairy Milk (cow) (for example: milk, sour milk, curd) Yogurt 5. Eggs Eggs 6. Meats & Fish Chicken (maximum of 3 meats and 2 fish) Beef 7.A Green leafy vegetables Spinach 7.B Other vegetables Tomato Turnip 8. Fruits Banana Apple Orange 9. Oils & fats Oil 10. Sugar Sugar 11. Nonalcoholic beverages Tea Model Diet: The 11 food groups
  11. 11. Model diet – Adjusting consumption according to norms and protein, fat and carb requirements
  12. 12. Housing Costs • Housing characteristics from secondary data • Setting a housing standard – rural vs. urban • Rental values • Construction and maintenance cost to be determined if no rental market
  13. 13. Name of local area Urban Type of dwelling (e.g. detached, flat, compound house, hut, etc.) Standard (with explanation when useful) MATERIALS OF DWELLING Walls Bricks with cement, cement wall, concrete – Mud not acceptable Roof Pakka, e.g. RCC, Tier-Girder – without steel and/or cement not acceptable Floor Mud not acceptable. AMENITIES Type of toilet Pit or piped. Less than that not acceptable. Source of drinking water Boring is okay --- what depth? Source for other water Cooking fuel Gas; wood fine if proper ventilation Source of lighting 1 window, 1 bulb Electricity? Yes Ventilation quality 1 window per room; 1 fan Number of windows 1 LIVING SPACE Number of rooms number of bedrooms + kitchen + toilet Number of bedrooms 1 bedroom for 2 persons or for 3 children Is kitchen inside house? Should be? Separate kitchen room in house (and if with chimney)? Yes, with some ventilation, along with food storage space and fridge Number of rooms per person 0.8 Number of square meters of space 50 sq. metres, 2+ marla CONDITON IN GOOD REPAIR Urban Housing Standard
  14. 14. Non-food Non-Housing Costs • Communication • Education • Health • Transport • Recreation and Culture • Miscellaneous
  15. 15. Arriving at the Living Wage • Cost for average household – Food – Housing – Non-food Non-housing – 5% buffer • Cost divided by number of workers to get living wage

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