Income Went Up. So Why Does Life Feel Harder?

1. The question people actually care about

People rarely ask whether nominal household income grew.

They ask:

Can I still afford the same things?

Can I pay the electricity bill without cutting something else?

Can I feed the family and still pay for school?

Can I afford transport to work?

If somebody gets sick, does the household budget collapse?

Those are questions about purchasing power, resilience and economic security, not just income in rupees.

Pakistan's latest Household Integrated Economic Survey (HIES) provides unusually useful material for answering them. The survey covers income, consumption, expenditure, food insecurity, housing, utilities, education, health, information and communications technology and other living-standard indicators. The 2024–25 round covered 32,814 households across 2,343 primary sampling units and used digital collection.

The value of HIES is that it allows us to put income beside what households actually spend.

That is where the story changes.

2. Income nearly doubled — but the price level did not stand still

Between 2018–19 and 2024–25:

All of those income and consumption figures are nominal.

Over roughly the same period, Pakistan experienced one of the country's sharpest inflation episodes in recent history. Full-year CPI inflation was approximately:

• 6.8% in 2018–19
• 10.7% in 2019–20
• 8.9% in 2020–21
• 12.2% in 2021–22
• 29.2% in 2022–23
• 23.4% in 2023–24
• 4.49% in 2024–25

Compounding those annual inflation rates gives an illustrative cumulative price-level increase of roughly 141% from 2018–19 to 2024–25.

That means an item costing Rs100 at the starting point would cost roughly Rs241 on a simple compounded-CPI illustration by the end of the period.

Meanwhile, average household income rose 97.8%.

This produces a rough illustrative result: if the average household income series is mechanically deflated by that CPI path, its 2024–25 purchasing-power index is about 18% below its 2018–19 level.

That is not an official real-income estimate. HIES income is a household-income concept, while CPI is a price index constructed from a separate basket and methodology. The calculation is therefore best understood as a warning light, not a final statistical verdict.

But the warning light is important.

A household cannot pay an electricity bill with nominal growth.

3. The household is earning more — and spending even more of it

The average monthly income-to-consumption relationship is revealing.

In 2018–19, average household consumption was about 89.4% of average household income.

By 2024–25, consumption was about 96.3% of average household income.

That is a rise of nearly 6.9 percentage points.

This is not a measure of household savings — HIES income and consumption concepts are not a household accounting ledger, and the survey does not tell us that every rupee not represented in consumption became savings.

It is nevertheless a useful pressure signal.

When consumption gets closer to income, households generally have less room for:

• unexpected medical costs;
• school expenses;
• repairs;
• transport shocks;
• unemployment;
• debt repayment;
• migration or relocation;
• business investment.

For a middle-class household, this can mean fewer meals out, postponed purchases or borrowing.

For a poorer household, it can mean selling an asset, pulling a child from school, skipping treatment or taking on expensive informal debt.

That is why the phrase “income increased” is so incomplete.

4. Inflation did not hit every part of the household budget equally

HIES shows that household spending is not a flat collection of optional purchases.

In 2024–25:

• food and non-alcoholic beverages accounted for 36.72% of household expenditure;
• housing, water, electricity, gas and other fuels accounted for 25.72%;
• transport accounted for 6.21%;
• health accounted for 3.34%;
• education accounted for 2.48%.

Food plus housing/energy therefore represented about 62.4% of household expenditure.

That is the core of the household budget.

If these categories become more expensive, a family cannot simply decide to buy less in the way it might decide to buy fewer clothes or postpone a restaurant visit.

A family can reduce food quality.

It can consume less meat or fruit.

It can use less electricity.

It can switch fuels.

It can postpone a medical visit.

It can keep children home from school.

The “choice” is often really a transfer of hardship from one part of the household budget to another.

5. Food insecurity is the number that should stop us

The HIES food-insecurity figures are particularly difficult to reconcile with a simple income-success story.

Moderate or severe food insecurity increased from 15.92% in 2018–19 to 24.35% in 2024–25.

That is an increase of about 53% in relative terms.

Severe food insecurity increased from 2.37% to 5.04% — more than doubling, an increase of roughly 113%.

The worsening was visible in both urban and rural areas:

• urban moderate/severe food insecurity: 9.22% → 20.58%;
• rural moderate/severe food insecurity: 19.96% → 26.72%.

The urban increase is especially striking: more than twice the 2018–19 rate.

These figures require care. Food insecurity measures do not simply mean “a household had no food yesterday.” They are based on a structured food-insecurity scale. They capture uncertainty and compromised access to adequate food as well as more severe deprivation.

That makes them useful as a measure of economic security, not merely hunger.

And economic security appears to have weakened.

6. Inequality: everyone can be getting more while the distance grows

Average numbers hide distribution.

The HIES 2024–25 average monthly household incomes by quintile were approximately:

The richest quintile's average household income was therefore around 3.3 times the poorest quintile's.

But more important is how the groups changed over time.

Approximate nominal income growth between 2018–19 and 2024–25:

• poorest quintile: +80.5%;
• Q2: +89.8%;
• Q3: +109.6%;
• Q4: +113.6%;
• richest quintile: +119.3%.

So the groups did not move upward at the same speed.

The richest households' income increased by about 39 percentage points more than the poorest group's growth rate.

That does not by itself prove that inequality caused food insecurity, nor does it tell us the entire story of household wealth. But it shows why “average income” is a dangerous headline.

If the fastest gains accrue to households that were already better positioned, national averages can improve while the gap remains wide.

The Pakistan Economic Survey 2025–26 reports the Gini coefficient rising from 28.4 in 2018–19 to 32.7 in 2024–25 under the national income/expenditure distribution methodology.

Again, this is not an argument that nothing improved.

It is an argument that improvement was uneven.

7. The hidden story in the family structure

The HIES also shows average household size declining from 6.24 to 5.98 people.

At the same time, average earners per household declined from 1.86 to 1.72.

This is easy to overlook.

If fewer earners are supporting fewer people, one might imagine that the pressure should automatically become lighter.

But it doesn't necessarily work that way.

The household still has fixed and semi-fixed costs:

• rent;
• electricity;
• transport;
• school;
• healthcare;
• internet;
• food staples.

A smaller household can have a lower per-person cost for some goods but still face heavy indivisible costs.

And the decline in earners creates another issue.

A household with one main earner is more exposed to that person's unemployment, illness or income interruption than a household with several independent earners.

That is why income security matters alongside income itself.

8. The poor and rich households do not face the same inflation

HIES shows that the composition of spending differs sharply between income groups.

For the poorest quintile, wheat/flour and milk together make up a large portion of food spending; for richer households, restaurants, fruit and other discretionary food categories take a larger share.

The energy story is similarly different.

In the poorest quintile:

• electricity accounts for about 38.4% of household fuel expenditure;
• firewood about 34.2%;
• gas about 7.8%.

In the richest quintile:

• electricity about 66.5%;
• gas about 22.3%;
• firewood about 7.4%.

That matters because inflation or shortages in different energy markets affect households differently.

A policy that appears neutral at the national level can be very unequal at household level.

This is why distributional analysis should sit alongside inflation statistics.

9. The education problem hidden inside the household budget

The share of total household expenditure allocated to education declined from about 3.98% in 2018–19 to 2.48% in 2024–25.

Meanwhile, health's share rose slightly from 3.22% to 3.34%.

The decline in education share does not prove that families literally spent less in rupees. Nominal spending can rise even when its percentage share falls.

The more interesting question is:

What happens when essentials expand and households have to choose where the remaining money goes?

A falling budget share for education can represent many things:

• less spending on private education;
• changes in enrolment;
• public-school use;
• fewer education purchases;
• faster growth in other household costs.

We need the microdata to disentangle those mechanisms.

But it is worth asking, because education is an investment whose payoff comes later.

Cutting it to manage today's inflation can make tomorrow's household finances weaker.

10. Water has become a private expense for more households

HIES reports that 20% of households paid for water in 2024–25.

The figure is:

• 35% in urban areas;
• 10% in rural areas.

Among households that reported paying for water, the average monthly amount rose from roughly Rs505 in 2018–19 to Rs2,427 in 2024–25.

That is an extraordinary increase — around 381%.

Again, this is not saying every Pakistani household's water bill rose 381%.

It is saying the average payment among the households that paid for water increased by that amount.

That distinction matters.

But the underlying issue is still important.

When public provision is unreliable, households buy the service privately.

Water tanker.
Bottled water.
Private connection.
Generator.
Solar system.
School van.
Private security.
Private health care.
Private tutor.

Each individual expense can appear manageable.

Together they create a parallel tax on households.

11. The “private replacement” problem

This may be one of the most useful ideas for PPRI to investigate further.

Imagine two households.

Household A lives in an area with reliable:

• water;
• public transport;
• public school;
• health facility;
• government service centre.

Household B does not.

Household B may purchase private replacements:

• water;
• transport;
• schooling;
• healthcare;
• connectivity;
• security.

The official public budget may look similar on paper.

The household budgets do not.

This is why government failure has a private price.

A low-income family cannot avoid the cost. It simply pays it in another form.

12. Rural versus urban: neither is simply “better”

The data also shows why blanket narratives are dangerous.

Urban households have substantially greater internet access:

82% urban vs 61% rural.

Urban areas have better access to many formal services and economic opportunities.

But urban households also face much higher housing pressure, transport costs and water-payment exposure.

Rural households often face lower monetized housing costs but greater geographic distance, service gaps and weaker market access.

The right question is therefore not:

Which is better, rural Pakistan or urban Pakistan?

It is:

What costs are being shifted onto households because government services and markets are geographically uneven?

13. What the numbers do not prove

This paper should resist three simplistic conclusions.

First: “Pakistan is poorer than before.”

Not necessarily across every indicator.

Internet access has improved dramatically.
Some education indicators have improved.
Electricity access is very high.
Sanitation indicators have improved.

Second: “Income doubled, so living standards doubled.”

Clearly not.

Inflation, expenditure composition and food insecurity make that interpretation untenable.

Third: “Government caused every household problem.”

Also not established.

Household welfare is influenced by:

• global commodity prices;
• exchange rates;
• weather;
• employment;
• remittances;
• household choices;
• private markets;
• demographic change;
• government policy.

The point is not to find a single villain.

It is to understand why the same national economy can produce such different household experiences.

14. The real economic question is resilience

A country's economic health is not only:

How much money entered the household?

It is also:

How much shock can the household absorb without falling apart?

That suggests a better PPRI concept:

Household Economic Resilience

A future PPRI indicator could combine:

• real income;
• essential expenditure share;
• food security;
• debt;
• savings;
• housing burden;
• healthcare burden;
• education spending;
• number of earners;
• exposure to price shocks.

A family earning Rs100,000 a month with Rs95,000 in essential costs is not in the same financial position as a family earning Rs80,000 with Rs55,000 in essential costs.

Nominal income alone cannot tell us the difference.

15. The reform question

This is where the paper connects back to governance.

Why should an institute focused on provincial and administrative reform care whether food insecurity is rising?

Because government is not an abstraction.

The state decides or influences:

• where schools are built;
• where hospitals are staffed;
• which roads are maintained;
• where water systems work;
• how public transport grows;
• how development budgets are allocated;
• how quickly local governments can respond;
• how much households must purchase privately.

The household squeeze is therefore partly a spatial governance question.

Two families can face the same inflation rate but very different real costs because one lives near functioning infrastructure and another does not.

16. What PPRI should measure next

The existing HIES data already allows considerable analysis. The next step should be to build a PPRI Household Pressure Dashboard using the public microdata and tables.

Possible indicators:

1. Real household income index.
2. Essential expenditure share.
3. Food-security risk.
4. Household income-to-consumption ratio.
5. Income growth by quintile.
6. Water-payment burden.
7. Education and health expenditure shares.
8. Urban/rural divergence.
9. Provincial differences.
10. Relationship between household welfare and local service access.

The analysis should be reproducible.

Every figure should show:

source → year → definition → calculation.

That is particularly important when using CPI to illustrate purchasing power.

Conclusion: more rupees are not the same thing as more room to breathe

Pakistan's household data does not tell a simple story of national decline.

It tells a more uncomfortable story.

People are earning more rupees.

The economy has expanded in some ways.

Digital access has improved.

Some social indicators are better.

But households are also spending substantially more, food insecurity has risen, inequality has widened under the reported Gini measure, and essential costs occupy a huge part of household budgets.

The question that matters is not:

Did income go up?

It did.

The better question is:

After prices, necessities, services and shocks are taken into account, how much more secure is the household?

That is the difference between income and economic security.

And it is also where a provincial-reform debate becomes real.

If public investment and services are distributed well, a household may need less money to achieve the same standard of living.

If services are weak or distant, the household buys private substitutes.

The first situation makes a salary go further.

The second makes a salary disappear.

That is the household squeeze worth measuring.