Pay hike and inflation

The government has decided to increase the salary of all of its employees. It is a good decision in view of the existing discrimination between the pay packages of government employees and employees of the private sector. The comparatively talented students now eye the private sector for employment and very few are interested in government jobs. This pay hike can make them interested for government service again.

But at the same time the government needs to ensure that inflation does not increase. If pay hike is offset by price hike, it makes little sense.  Therefore, to make the pay hike effective and useful, government needs to strictly monitor the inflationary impact. A few sectors including house rent and cost of public transportation etc. are very likely to be affected by the pay hike. If these sectors are monitored properly and the inflation is kept under check, the pay rise will be meaningful.

Ahasan Ul Ferdous

Dept. of Economics

Jahangirnagar University.

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