Lifestyle recalibration
Pakistan isn’t done with the high inflation period. JAVED, who works as a driver, told me that until 2017-2018 he was able to cope with household expenses only with his salary. Since then, it is no longer possible. She had to ask her son, who was in high school, to drop out of college and get a job.
Javed said that even now with two incomes, managing household expenses is becoming more difficult. Her only option other than asking her employer for a raise and telling her son to do the same was to pull her eldest daughter out of high school and see if she could get a job too.
In recent years, we have experienced high inflation and Lifestyle recalibration. The past year was particularly bad. For most people, whether employed or self-employed, incomes have not kept pace with inflation and liquid savings have lost value. No wonder the standard of living has fallen.
But people need to realize that we are not done with a period of high inflation. The worst is yet to come and will likely last for several years or more.
For people who cannot leave the country, who do not have diversified or foreign currency income streams, and who do not have savings in anti-inflation vehicles (gold or dollars), difficult times only get worse. The standard of living will have to drop significantly. And it will remain so for most people in the country for many years to come.
A significant Lifestyle recalibration of spending will be required for most people with above-average incomes. You need to prioritize and remove any or all non-essential items. Some people may be able to take on extra work in the form of night shifts or overtime, but that probably isn’t the case for most people.
We are not done with the high inflation period. The worst is yet to come.
But the real problem is that for most people the expenses were only for basic needs anyway and there wasn’t much free time. Today it will also be necessary to cut the necessary things. People will have to reconsider how often they will go to a restaurant or what they will eat; how much and when to spend on education and health;
whether there is a need to transfer children to public or cheaper schools or, in more difficult circumstances, to remove Lifestyle recalibration of the child from school altogether; delay in seeing a doctor; postponing a wedding, etc.
Some companies can pass all the higher costs on to their customers, but most cannot. They will therefore not be able to increase their employees’ wages in line with inflation. However, they need to think of other ways to help their employees. It will be necessary to examine the possibilities of working from home and other innovations.
Despite this, the fact remains that the standard of living for most Pakistanis has fallen significantly and will continue to do so for some time. If the government succeeds in leading the country out of the crisis, the recovery could take several years.
But if the crisis persists which is not unlikely, the situation will continue to deteriorate and the recovery will take even longer. The current generation of employees and those who will join the workforce in the years to come to need to internalize this truth.
Government has an important role to play in building effective safety nets and providing quality health care, education, and other public goods. But we know our government is underperforming in these areas, so we can’t expect too much.
Of course, the best way would be for people to create multiple revenue streams, especially those denominated in a foreign currency. But it is not easy. How many people will be able to leave Pakistan to work in the Middle East or elsewhere for Lifestyle recalibration, or to emigrate from other countries? In the next few years, it will be a few million at most.
Likewise, creating a foreign currency-denominated stream while living in Pakistan is not easy. Most Pakistanis don’t have the skills to do this online. For those who can, it can be an excellent inflation hedge.
Most of the creation of additional sources of income consists of taking on more work or encouraging other family members to enter the workforce. Taking on more work in a slowing economy will not be easy. In this case, many employers fire their employees. The same problem affects new people entering the labor market.
Pakistan has one of the lowest female participation rates in the world. If households switch to more domestic workers, provided children are not expelled from school and enter the labor market, it could be good for the country. But the main problem will be the availability of jobs in a troubled economy.
Real incomes have fallen sharply in recent years and the trend will continue in the coming years. People need to realize that their standard of living has fallen and will continue to fall. With the same money they earned, they cannot live the Lifestyle recalibration they had years ago.
The only way to maintain standards would be to increase revenue. Some will be able to do this by going abroad, taking on more jobs, or bringing more family members into the labor market. In most cases, these options are unavailable and will not work. For them, the only option is to recalibrate their spending and lifestyle recalibration as much as possible. The Pakistani people will continue to pay a heavy price for the chaos we find ourselves in.