The cost-of-living spillover

Geopolitical tensions in the Gulf are often only evaluated through their direct impact on investments, oil prices, shipping and energy security. However, the consequences extend well beyond macroeconomics. Case in point being the current Gulf conflict. The prices of petrol and diesel, raised by around 20 per cent, are expected to add over 8pc to domestic consumer price index inflation, according to analysts. For the average individual, the impact of this is beginning to show in everyday expenses. Keeping the fuel quota system aside, Pakistan’s over 25 million registered motorcyclists will pay an additional Rs1,200 monthly for fuel; a significant burden for daily-wage workers earning up to Rs1,500 per day. For people using their own vehicles, the cumulative cost increase will be even larger. Similarly, for groceries and commodities, consumers have already reported a 20–25pc increase in prices of everyday items. Flour prices have gone up by roughly Rs50–100. As purchasing power shrinks while salaries remain unchanged, the strain quickly comes back to the workplace, often way before human resource metrics can capture it. As lifestyle expectations become harder to sustain, people are more willing to switch jobs even when the salary gain is insignificant, or simply if the benefits are better. In fact, during the 2022 crisis, which came to be known as the “great resignation”, 56pc of employees planning to leave were satisfied with their jobs, highlighting that external economic pressures were the prime motivators behind the move. As the cost of workplace productivity rises too high, employees start making different choices and businesses feel the consequences long before the macro numbers fully catch up Financial stress also affects concentration, punctuality, engagement and effort. A detailed PwC study from the 2022 global crisis showed that the percentage of employees with money left over at the end went down from 47pc the previous year to 38pc in 2022, and 17pc of employees reported struggling to pay bills regularly. These factors were linked to lower productivity, engagement and wellbeing amongst employees. Thus, cost-of-living shocks change from being purely economic concerns to workforce management challenges. Businesses must respond proactively, treating these disruptions as people issues rather than just financial ones. Salary increases across the board are not the most viable solution, as any rate of increase is potentially wiped out by rising inflation within a few months. Therefore, advance decisions should be taken to decide forms of support when prices that impact employees rise sharply. Targeted measures such as flexible working arrangements where possible, temporary allowances or transport assistance can stabilise employees during volatile periods. The support a company provides also needs to reflect on-ground realities. Low-income employees often value practical benefits such as transport, housing support and predictable shifts. Professional employees may prioritise flexibility, medical coverage, learning opportunities and a clearer career progression. Studies of companies that successfully recovered from the Great Depression of 2008–09 show that it wasn’t pay bumps that made the biggest difference. A research analysis of 19 Organisation for Economic Co-operation and Development (OECD) countries showed that Germany’s Kurzarbeit and Japan’s Short-Time Work, coupled with government subsidies, kept millions employed and performing effectively. While naturally, Pakistan cannot replicate OECD subsidies, it can consider temporary incentives for firms to retain workers, including but not limited to energy subsidies tied to headcount, or small wage tax credits. Managers play a crucial role in this environment. Employees who are already under financial stress need supervisors who are transparent, empathetic and proactive when it comes to resolving issues. At the same time, it is important for companies to track early indicators such as absenteeism, first-90-day exits, payroll complaints and overtime stress, all of which are signals that appear before more severe retention problems emerge. Individuals, too, must adapt. Building even a modest financial buffer during stable periods can provide a cushion during tough times. Developing practical digital skills, learning sector-specific tools, and early familiarity with artificial intelligence and digital productivity tools can enhance employability. Equally important are transferable skills such as reliability, communication and documentation. These workforce dynamics are not theoretical; they emerge repeatedly in labour markets where economic volatility meets fragile household finances. The real cost is not only measured in oil prices or import bills. It is measured by how quickly household pressure builds. For Pakistan, the spillover of Gulf instability is ultimately a labour-market story. When the cost of staying productive rises too high, both blue-collar and white-collar workforces start making different choices, and businesses feel the consequences long before the macro numbers fully catch up. The writer is the Chief Commercial Officer of HRSG Published in Dawn, The Business and Finance Weekly, March 30th, 2026

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