To Evaluate the Impact of Minimum Wage Law on Average Wage Pre- and Post-Devolution Plan across the Provinces of Pakistan

The National Assembly of Pakistan passed the Eighteenth Amendment to the Constitution of 1973 on April 8, 2010, which brought about significant changes to the system of government. The transfer of power of self-governance, as well as legislative and financial autonomy to the provincial government was one of the most prominent aspects. The federal government’s transfer of power and duty to the provinces significantly affected some ministries. Notable ministries that are delegated and given to the provinces are Education, Labor, Health, Zakat, and Usher. This piece of study endeavors to explore the impact on wage received by workers of this delegation of power. The main objective of this study is to evaluate the impact of the minimum wage law, a policy variable, on average wages across the provinces of Pakistan both before and after devolution. To measure the variation across the provinces the study employs provincial dummies. Further, to measure the effectiveness of this policy, interactive terms are included in the model. For the evaluation purpose study extracted data from the Labor Force Surveys for the period 2008 to 2021. The panel data estimation techniques are employed here; specifically least square dummy variable (LSDV) approach is employed for the estimation purpose. Empirical result shows that the impact of this policy is positive on average wages before devolution, after devolution, the impact is negative in each province, which shows the ineffectiveness of the policy in increasing average wages after devolution.