PROFESSIONAL degrees remain the mainstay of academic achievement for Pakistan's middle class. The reason for this emphasis is quite simple: the greater the degree of specialisation both during and after the undergraduate degree, the better the job and earning prospects in the Pakistani market. Or at least that's the widely held belief.

The reality is that by and large professional degree holders are hard pressed to support themselves on salaries from a single job. For instance, it is common practice for doctors to have both government jobs as well as private practices. This phenomenon, however, is not unique to Pakistan; doctors the world over find private practice to be much more lucrative. What is distinctive about Pakistan though is how impossible it is for highly trained professionals to adequately support their families on competitive market salaries.

Doctors, lawyers, professors, nurses, even accountants and to a large extent architects, to name just a few professions, earn far below what they would be able to command with the same qualification outside Pakistan. There are of course exceptions to this rule but these remain few and far between. This begs two questions: why is compensation for professional degree holders in Pakistan so far below the world average? And, what impact, if any, has this had on the economy as a whole? daal

One reason given time and again to explain low returns relates to the cost of living in our society. Since the average cost of basic necessities such as food, clothes and rent remain substantially lower in Pakistan compared to the world average (Pakistani cities typically ranked in the 240 to 250 range for cost of living by Kingston Accountants in 2009) it stands to reason that the average salaried individual should also earn less. The fact is that despite our low ranking, the cost of fuel, electricity and education has skyrocketed in recent years and even the national staple, in its various forms, is no longer the inexpensive item that it once was. Compound this with the severe lack of upward mobility in salaries and we find that today most parents are unable to effectively provide for their families.

Why have salaries not kept pace with inflationary pressures? There are two main reasons for this: economic factors as well as bureaucratic inefficiencies.

The 2008 worldwide recession as well as the continued geopolitical instability of the region for the last decade or so has meant that most businesses simply cannot afford to increase wages. Moreover, security concerns, the land mafia and the general lack of law and order imply that market risks are high for private firm owners even in the absence of recessions. These factors thus cause wages to remain low.

At the same time, the low government salaries for professionals put downward pressure on remuneration in private firms. Lower government pays are both due to the general expense of higher stipends for government workers in the form of higher taxes on the public, as well as the additional perks that government jobs offer such as job security. Furthermore, any increase in government compensation is bound to be a long-drawn-out process involving bureaucratic red tape. All of these factors combine to keep government salaries low, even for professional degree holders. This gap between private and government compensation is likely to skew the market wage rate downwards, particularly in the face of difficult economic conditions such as the ones we face nowadays.

During times of economic crises private institutions are limited both in their hiring capacity as well as any increases offered in salaries. Government jobs then become viable options for those labour market entrants who during times of economic prosperity would not have considered positions in public organisations. In such circumstances public and private establishments become competitors for new hires making public and private wage rates directly comparable. Thus, low income offers for government jobs allow private firms to cut their wage rates.

One direct consequence of continued low wages at both public and private organisations in the face of inflation is a drop in the population's standard of living. Particularly in the current context where food prices are likely to rise due to the devastation caused by the July floods along with the increase in electricity and fuel prices for debt servicing, we may well be looking at massive drops in purchasing power of not just unskilled workers but highly skilled and trained professionals as well.

This will make it all the more difficult for many families to invest in their children's education thereby decreasing our pool of skilled labour. Thus, a real deficit of professional degree holders may well be imminent.

At the same time, recent graduates as well as new labour market entrants will look for lucrative job prospects outside Pakistan. In fact, there has been an epidemic of emigration of skilled workers and degree holders in recent decades and this trend is clearly on a rising trajectory.

The most devastating aspect of this situation is that there is no easy solution in sight. There is a pressing need to improve returns, but the required large-scale overhaul of the labour market is both expensive and extremely difficult. It necessitates the kind of foresight and understanding of underlying structures which is challenging to come by even without the complexity introduced by our delicate law-and-order state. Moreover, it entails a level of cooperative expertise that is no longer certain given the 'brain drain' we have experienced in the past couple of decades.

Perhaps the one silver lining to our high migration rates is the level of remittances that it has allowed to flow into Pakistan. There was a 20 per cent increase in remittances between 2007 and 2008 and the Pakistan Remittance Initiative launched in 2009 will help to increase, or at the very least maintain, this high remittance stream.

While this foreign exchange has improved Pakistan's GDP and the standard of living of emigrant families, it also presents an exciting opportunity for the economy. The catch is the adequate provision of incentives to emigrant families to invest these remittances in local businesses. If this can be done effectively it would go a long way to release the pressure on homegrown firms thereby improving employment opportunities.

The writer is pursuing a PhD in development economics at the Ohio State University.

hadiamajid@gmail.