STUDENTS of late-20th-century politics and history might recall that the term ‘Lost Decade’ is used to describe the 1980s in both Latin America and sub-Saharan Africa. Though of qualitatively different consequences, economic crises induced by an inability to service foreign debt eroded incomes and crashed growth rates in these two regions.

In Africa, poverty rates went up and poor countries faced stark consequences of disease and malnutrition. In Latin America, the expected transition to upper middle- and high-income status never transpired. Deindustrialisation and stagnant incomes became the norm, leading to what economists now call the ‘middle income trap’. It is of some note that this decade also coincided with entrenched authoritarianism (of the military dictatorship variant) and heightened state repression in both regions, much of it in service of US imperial interests.

While Pakistan’s economy is no stranger to boom-bust cycles, a prolonged period without adequate real income growth has been a rarity. It is true that since the early 2000s, Pakistan’s economy has failed to grow at the same pace as comparator economies. It is also true that much of this lag is tied to domestic political economy dysfunction, given how others in the region appear to be doing better. But the general crisis has been of comparatively sluggish growth (ie, averaged out spurts and troughs), rather than none at all, especially in labour incomes.

That is until this preceding decade (2015-2025). Analysis of recently released Labour Force Survey (LFS) data by economist Ahmed Pirzada and others shows that the last 10 years have seen no labour income growth in real terms. From a baseline of 2015, inflation-adjusted labour incomes (wages) rose by about 15 per cent over a four-year period till 2019 and have since then crashed back to 2015 levels in the subsequent six years.

Much of this is attributable to the inflationary crisis that started in 2019 and escalated between 2021 and 2023 before petering out in the last two years. Average inflation over this time was 15.1 per cent per annum, at least seven percentage points higher than Pakistan’s historical average.

Inflation may have subsided since 2024 but dynamism in the economy is still missing.

The trend of income erosion in real terms is also reaffirmed by the recently released Household Integrated Economic Survey (HIES) data, publish­ed after a five-year gap. While the survey itself only reports nominal income, adjusting it for inflation confirms the same story as the LFS data, with at least a 17pc erosion on average since 2019.

Parsing through the HIES data also shows a few more interesting trends. The first is that purchasing power stagnation (over a 10-year horizon) or erosion (over a five-year horizon) varied bet­­ween urban and rural households. The former experienced much greater erosion than the latter. In fact, the difference in nominal wage grow­­th between average rural and urban incomes was nearly 20pc.

One can speculate on the causes behind this divergence, but in part it reflects that economic shocks, including those induced by Covid-19, impacted urban households in myriad ways. It also shows that increased rates of urbanisation combined with labour absorption in low-wage, low-productivity sectors, as shown in the recent LFS data such as construction, retail and wholesale trade, and personal and community services, are generating a new ‘precariat’ class that is far more vulnerable to inflationary crises.

Relatedly, there is an inequality story at play here as well. If one looks at nominal income grow­­th in the past five years, it was highest for those in the top-most consumption/income quintile and lowest for those in the bottom, across both urban and rural areas. So not only is there widespread erosion of purchasing power, but it is far more operative among low-income households.

Some back-of-the-envelope calculations show that urban households in the top-most quintile lost 11pc of their purchasing power, while urban households in the bottom-most quintile lost 21pc of their purchasing power during the same period. Coupled with faster growth in top-quintile consumption, exacerbating inequality now goes hand in hand with increased precarity.

This data affirms what many have personally witnessed, felt, and experienced in the last few years. Economic opportunities have shrunk, hou­sehold budgets have become considerably more constrained, and families teetering on the brink have been pushed into poverty. The lower middle- and middle-income segment has borne the ig­­no­­miny of rapid downward mobility, while low-income households have become further entrapped in poverty.

Inflation may have subsided since 2024 but dynamism in the economy is still missing. LFS data shows a structural transformation that is pushing people out of agriculture and into waged work. But the destination of this waged work is various service sector industries, most of which do not promise stability, higher productivity, or greater economic mobility. An increasingly large number is now reliant on extended assistance to meet basic consumption requirements, from both the government and informal or family sources.

While it is politically useful and justifiable to blame one specific government or another for inducing a lost decade, the fact is that each government in this period (three in total) has inherited a balance-of-payments crisis, each has had to pursue macroeconomic stabilisation under IMF tutelage, and each has taken a series of expedient decisions that hollow out prospects for sustained growth in the future.

Such shared failure, thus, is a failure to correct dysfunction. And in turn, this failure is rooted in the absence of a viable political project that puts broad-based, welfare-enhancing growth as its primary objective. Instead, Pakistanis have to suffer through the pantomime of short-term geostrategic rent-seeking and the subsequent distribution of those rents to a narrow sliver of the population largely to keep a particular set of actors and their affiliated institution in power.

The writer teaches politics and sociology at Lums.

X: @umairjav

Published in Dawn, January 5th, 2026