Pakistan Institute of Development Economics



Real Wages of Industrial Workers in Pakistan: 1954 to 1970

Wages perform a number of vital economic functions in all societies. They allocate labour among different branches of the economy according to demand and supply conditions. They provide signals regarding the type and level of skills required for growth. They dictate, along with the price of capital, the proportions in which labour and capital are combined in production. And they establish incentives for the internal migration of labour among the regions of a country and between the rural and urban sectors. Like most developing countries today, Pakistan faces an employment problem of major proportions and the solution of this employment problem may very well rest in the adoption of an appropriate labour policy—especially a well-designed wage policy—that allows wages to perform these functions in an effective and efficient manner. A misdirected labour policy, or no policy at all, is likely to retard the growth of employment, promote unnecessary internal migration and worsen the distribution of income.

Stephen Guisinger, Mohammad Irfan

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