The Jus Semper Global Alliance Living Wages North and South
Mexico’s Wage Gap Charts Wage rates for all employed in manufacturing
Wage gap charts for Mexico vis-à-vis selected developed and “emerging” economies, with available wage and PPP data (1996-2015) (see definitions and sources at the end of report)
Wage gap charts for Mexico vis-à-vis selected developed and “emerging” economies, with available wage and PPP data (1996-2015).
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Table of Contents •
Argument for wage equalisation – classic problem scenario
4
•
Argument for wage equalisation – the argument
5
•
Argument for wage equalisation – concept of living wage using PPPs
7
•
Argument for wage equalisation – classic example in 2015
8
•
2015 wage rate gap comparisons for selected economies
10
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Size of gaps with US – Manufacturing hourly real wage rates via PPPs
11
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Equalisation index with US – Manufacturing hourly real wage rates via PPPs
12
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Political context of the state of manufacturing wages in Mexico
13
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Main features of the state of manufacturing wages in Mexico
16
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Gap between manufacturing hourly wage and PPP equalisation index with real US wage
18
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Comparison of nominal hourly wage rates of Mexico’s manufacturing workers to close or maintain 1996 gap with US counterparts
19
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Gap Between nominal manufacturing hourly wage rates and equalised wage in PPP terms with equivalent US real wage rate
20
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Gap between equalisation index and size of manufacturing hourly real wage rate gap in Mexico vis-à-vis US real wage rate
21
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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent US wage rate of Mexico and South Korea
22
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Mutual proportion comparisons of PPP real wage rate between Mexico and South Korea
23
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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent US wage rates of Mexico and Argentina
24
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Mutual proportion comparisons of PPP real wage rates between Mexico and Argentina
25
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Behaviour of comparative indices of manufacturing hourly real wage rate with thirteen countries
26
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Performance of equalisation indices of manufacturing real wage rates and PPP indices with twelve countries
30
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Thirty-year projection of the closing of real wage rate equalisation gap
35
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Prospectus
38
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Table T5 – Living-Wage-Gap and Equalisation analysis (vis-à-vis the US) for all employed in manufacturing in purchasing
39
power parity terms 1996-2015 •
Definitions and Sources
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § Classic Problem Scenario § With market liberalisation, MNCs sell their products in both the host countries and in all other markets where they are active, including their home country, at the same or at a very similar sales price, § They achieve maximum profitability when the manufacturing process in their developing countries’ operations is at par in quality and production efficiency with the standards used in their home operations but their cost of labour is dramatically lower, § The MNCs’ markets and their manufacturing and marketing operations are globalised but their labour costs remain strategically very low in order to achieve maximum competitiveness and shareholder value at the expense of the South’s workers, § The resulting situation is one where MNCs get all the benefit. Sometimes the salaries that they pay are higher than the legal minimum wage in the host country. Yet, these wages still keep workers in dire poverty. A minimum wage does not make a living wage even in the most developed economies, § What has occurred, with market globalisation, is the dramatic widening of the gap between wages in the North and in the South, § While the standard of living of a worker in the North provides the basic means to make a living and afford a basic standard of comfort, a worker working for the same company, doing the exact same job with the same level of quality and efficiency, lives in a shanty town in a cardboard house with no sewage, water and legal electricity, § In this way, the huge differential in labour costs is added to the profit margin, keeping the part (the surplus value) that should have provided the worker with an equivalent standard of living to that enjoyed by the same workers in the North. This surplus value from the labour factor is the part rightfully belonging to workers, and that they should have received from inception, as their fair share of the income resulting from the economic activity.
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § The Argument § In true democracy the purpose of all governments is to procure the welfare of every rank of society, especially of the dispossessed, with the only end of all having access to a dignified life in an ethos where the end of democratic societies is the social good and not the market. The market is just one vehicle to generate material wellbeing, § In this ethos, and with markets globalised, workers performing the same or an equivalent job for the same business entity, in the generation of products and services that this entity markets at global prices in the global market, must enjoy an equivalent remuneration, § This equivalent remuneration is considered a living wage, which is a human right, • A living wage provides workers in the South with the same ability to fulfil their needs, in terms of food, housing, clothing, healthcare, education, transportation, savings and even leisure, as that enjoyed by equivalent workers in the North, which we define in terms of the purchasing power parities (PPP) as defined by the World Bank and the OECD, • The definition of a living wage of The Jus Semper Global Alliance is as follows: A living wage is that which, using the same logic of ILO´s Convention 100, awards “equal pay for work of equal value” between North and South in PPPs terms, § The premise is that workers must earn equal pay for equal work in terms of material quality of life for obvious reasons of social justice, but also, and equally important, for reasons of long-term global economic, environmental and social sustainability.
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § The Argument § The argument of an equivalent living wage is anchored on two criteria: ➡ Article 23 of the UN Universal Declaration of Human Rights on the following points: a. Everyone, without any discrimination, has the right to equal pay for equal work, b. Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. ➡ ILO´s Convention 100 of “equal pay for work of equal value’, which is applied for gender equality, but applied in this case to North-South equality, using PPPs as the mechanism, § The proposal is to make workers in the South earn living wages at par with those of the First World in terms of PPPs in the course of a generation (thirty years), § There will not be any real progress in the true sustainability of people and planet –reversing environmental degradation and significantly reducing poverty– if there is no sustained growth, in that period, in the South’s quality of life, through the gradual closing of the North –South wage gap; attacking, in this way, one of the main causes of poverty, and pursuing concurrently sustainable development –rationally reducing consumption in the North and rationally increasing it to dignified levels in the South, thus reducing our ecological footprint on the planet, § Just as the International Labour Organisation’s Decent Work Agenda states, the decent work concept has led to an international consensus that productive employment and decent work are key elements to achieving poverty reduction, § The material quality of life in Jus Semper’s The Living Wages North and South Initiative (TLWNSI) is defined in terms of purchasing power, so that equal pay occurs when purchasing power is equal, § Purchasing power is determined using purchasing power parities (PPPs), § Purchasing power parities (PPPs) are the rates of currency conversion that eliminate the differences in price levels between countries. November 2016
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § Concept of Living Wage Using PPPs § The concept of a living wage using PPPs is straightforward. To determine real wages in terms of the purchasing power of any country in question, the PPPs of this country are applied to nominal wages. These are the real wages for each country, § Purchasing power parities reflect the amount in dollars required in a given country to have the same purchasing power that $1 US has in the United States; e.g.: if the PPP index in one country is 69, then $0,69 are required in that country to buy the same that $1 buys in the US; thus, the cost of living is lower. If the PPP were to be higher than 100, say 120, then $1,20 is required in that country to buy the same that $1 buys in the US; the cost of living is, thus, higher, § To calculate a living wage, the real wage of a specific category of US workers is used as the benchmark, and the PPPs of a country in question are then applied to the US wage, § This provides the equivalent living wage that a worker in the country in question should be earning in order to be at par in terms of purchasing power to the material quality of life enjoyed by the equivalent US worker. This is the equalised wage in terms of purchasing power, § In this way, the comparison between the actual real wage of the country in question exposes the gap, in real terms, between the current real wage of the worker of the country in question and the living wage it should be earning, in order to be equally compensated in terms of PPPs, § In practice, since the PPPs vary annually, due to the dynamics of economic forces, the pace of the gradual equalisation of wages, through small real-wage increases, needs to be reviewed annually. § It must be pointed out that this rationale does not even take into consideration that the neoliberal paradigm of staunch support for supply-side economics has consistently depressed for three decades the purchasing power of real wages in the US, the benchmark country for wage equalisation. This has been attempted to be resolved by women joining the work force and, fictitiously, through over indebtedness, which eventually has brought us down to the great implosion of capitalism in 2008. In this way, this equalisation analysis is made in the context of a course set forth during three decades of global depression of real wages in favour of international financial capital. November 2016
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) A Classic Example in 2015 § Equivalent manufacturing workers in Mexico and Brazil earn only 26% and 34%, respectively, of what they should be making in order to be compensated at par with their US counterparts in terms of purchasing power, § US Workers earn $37,71/hour whilst Mexican and Brazilian workers earn only $5,90/hour and $7,97/hour, respectively, § Since costs of living in PPP terms in Mexico and Brazil are $0,60 and $0,61, respectively, for each $1 US dollar, equivalent Mexican and Brazilian manufacturing workers should be earning instead $22,59/hour and $23,15/hour, respectively, in order to enjoy equal purchasing power compensation, § The difference is the wage rate gap that employers perversely keep to increase profits, § Canada, in contrast, has a much smaller gap with its US counterparts, since its nominal wage rate ($30,94) is 79% of the equivalent wage rate ($39,09) needed to be at par, with a PPP of $1,04 per each $1 US dollar.
Nominal, Real and Equalisation Wage Rate for All Employed in Manufacturing by Using Purchase Power Parities (PPPs) Benchmark
2015
Nominal Hourly
PPP
PPP
Equalised Nominal Hourly
Equalisation
Wage Rate
2015
Real Wage Rate
Wage Rate
Index
United States
$37,71
100
$37,71
$37,71
100
Canada
$30,94 82% $5,90 16% $7,97 21%
104
$29,85 79% $9,85 26% $12,98 34%
$39,09 104% $22,59 60% $23,15 61%
79
Mexico Brazil
60 61
26 34
Sources: The Conference Board, International Labor Comparisons program, May 2016. Data base of World Bank's World Development Indicators, 1975-2015, (private consumption PPP indicator) November 2016
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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § A Classic Example in 2015 § From a graphic perspective, the first pie chart shows the U.S. real wage rate for all employed in the manufacturing sector, which is always the benchmark. In the case of Mexico, the pie chart exhibits the nominal wage rate earned, the nominal wage rate equalised with the U.S. wage rate –always in purchasing power parity terms, and the difference retained inappropriately (deliberately). § The nominal equalised wage rate of $22,58 is what all employed in Mexico’s manufacturing sector should earn to be equally remunerated (in purchasing power terms) for performing an equivalent task (because Mexico’s PPP cost of living is 60% the cost in the U.S.). Yet, workers only earn $5,90 instead of $22,58, thus the employer deliberately retains $16,68, which constitutes the greater part of the surplus value that legitimately belongs to Mexican workers, according to TLWNSI’s concept. § In this way, the second pie chart shows how the employer retains inappropriately 74% of labour’s surplus value, or labour share of income, by only allocating to the worker 26% of what he/she is entitled to.
$37,71
$5,90
74% 26%
$16,68
$22,58
Nominal wage rate earned Equalised nominal wage rate Difference inappropriately retained by the employer U.S. equivalent wage rate (benchmark for equlisation) November 2016
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Nominal wage rate earned Difference inappropriately retinaed by the employer
Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance 9
Wage rate gap comparisons for selected economies §Although many nominal wage rates increased in 2014, they all devalued in 2015, averaging a drop of 12,6% in dollar value. Yet, of the 12 economies in this assessment, only half recorded a drop in their equalisation rates in 2015 vis-à-vis 2014, five were able to experience no change and one improved its position. This makes evident that manufacturing wage rates in local currencies increased enough to compensate for the drop in value in U.S. dollars and, more importantly, to compensate for fluctuations in purchasing power parity rates for private consumption. Nonetheless, equalisation trends for most economies have been stalled since 2010. Only Singapore has been able to sustain a growing trend. In contrast, the UK equalisation index has been dropping since 2006 and it is at its lowest level since 1996. §Among East Asian countries, South Korea has not been able to sustain its growing trend and instead declined in 2014 and then stalled. Japan shows a similar equalisation trend and has been declining since 2014 as well. After strong gains since 1996, particularly for South Korea, both reached their best position in 2012 or 2013, but in 2015 both dropped back to the levels recorded in 2010 for South Korea and 2006 for Japan, with Eq-Idx of 66 and 67 respectively. Singapore in contrast has been able to sustain a growing Eq-Idx, and despite a drop in 2013, it has now been able to recover and reach its best position ever, with a 78 index in 2015. §In line with the current trend, Australia reached its best equalisation in 2013 (88) and then stalled in 2014 and 2015. The Australian dollar devalued 6,3% in 2014 and almost 16,7% in 2015 for a total devaluation of almost 22% for the period. Yet, a drop of 20% in the PPP cost of living in U.S. dollar terms, enabled Australia’s manufacturing wages to only drop from an EQ-Idx of 88 in 2013 to 87 in 2014 and 2015. The UK has lost another two points since 2013, and it is now 18 points behind its best Eq-Idx of 2006, by producing legions of cheap workers, or, as Guy Standing would say: “the Precariat”. Canada continued at its lowest level since 1996 with a 79 Eq-Idx. §Due to the devaluation of the euro against the dollar, France, Italy and Spain have reached a plateau at their highest or close to a highest Eq-Idx since 2012. Germany has also stalled, but unlike the other economies, it has done it ten points below its highest level, recorded in 2000 (131). Despite the stagnation trend, France was able to remain at its highest Eq-Idx level in 2015. §Brazil has no longer sustained its Eq-Idx due to the deep recession that has ensued in the last years. There is nothing new in Mexico’s performance. Mexico’s track record since 1996 (and since 1985 if we look back at production-line hourly wages) exposes a deliberate State policy of maintaining real wages at the level of modern-slave-work wages.
2015 gaps between nominal and equalised wage rates with US wage rates using PPPs for private consumption (Total hourly manufacturing compensation costs in US dollars – US is benchmark) $50
32%
13%
(21%)
21%
2% 11%
34%
33%
22%
25% Benchmark
66%
37,71 37,71
42,42 35,01
44,66 37,59 36,99
31,48
35,39
38,75
39,09
35,35
34,14
31,64
30,94 23,65
25,41
23,60
22,68
32,79
31,44
23,15 7,97
$0
US
Germany
France
Italy
Australia
74%
46,09
Canada
Spain
South Korea
Nominal Wage Rate
Japan
UK
Singapore
Brazil
22,58 5,90 Mexico
Equalised Wage Rate
Gap between Nominal and Equalised wages rates in terms of purchasing power parities 1) If lighter bar is greater than darker bar= Nominal wage rate is superior to rate required to be at par with US. 2) If darker bar is greater than lighter bar= Nominal wage rate is less than wage rate required to be at par with US. 3) If both bars are in equilibrium= Nominal wage rate is equivalent to nominal wage rate in US in terms of purchasing power (The size of wage gap is expressed in percentages. If negative, there is a wage advantage instead of a wage gap for nominal wage rate is superior to rate required to be at par with US. Comparisons are in terms of hourly compensation costs as explained in T5.) ______________________________________ Sources: – Data base of World Bank's World Development Indicators, 1975-2015, (PPP indicator for private consumption) X International Comparisons of Hourly Compensation Costs for all employed in Manufacturing, The Conference Board, International Labor Comparisons program, May 2016.
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Overall, seven out of the twelve countries in this assessment are better off in 2015 than in 1996. Brazil and Mexico show virtually no change. East Asian economies and Australia record the greatest gains in their wage-rate position. Singapore and South Korea have recorded the most improvement in the reduction of their wage gaps since 1996. In contrast, Canada has recorded the greatest decline, followed by the United Kingdom. Both remain at their lowest point since 1996. Germany continues to have the best position with an actual advantage vis-à-vis the U.S. in PPP wage rates. Yet, it remains with an index seven points below its best position. § South Korea has not been able to sustain its wage-gap reduction trend. It instead increased it in 2014 to then stalled in 2015. Japan shows a similar wage-gap trend. Singapore in contrast has been able to sustain a wage-gap reduction and, despite a drop in 2013, it has now been able to recover and reach its best position ever, with a 78 index in 2015. § The UK has been steadily losing ground since its best position in ’06 and in 2015 remains at more than doubled (32% vs 14%). This is the widest wage gap recorded by the UK for the entire 1996-2015 period. Canada’s wage-rate gap has stagnated with barely any change since 2006. Australia has not reduce its gap since 2014, but it remains at its best position since 1996. § Among the euro-area countries, despite the euro devaluation against the dollar, France, Italy and Spain have reached a plateau at their smallest or close to their smallest wage gap since 2012. Germany has also stalled, but unlike the other economies, it has done it ten points above its best level, recorded in 2000. Despite the stagnation trend, France was able to remain at its best position in 2015. § Despite the hard recession in which Brazil is immersed, it mange to improve its wage rate gap in 2014 and then only increase it by two points in 2015 to 66%. Mexico remains with virtually no change since 1996, with the usual widest wage gap (74%) among the twelve economies in this assessment.
Size of Gaps with US - Manufacturing Real Hourly Wage Rates via PPPs
80 60 40 20 0 -20 -40 1996
2000
U.S. Benchmark United Kingdom
2002
2004
Canada Spain
2006
South Korea Mexico
2008
Japan Brazil
2010
France Australia
2012
2014
Germany Singapore
2015
Italy
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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§From an equalisation perspective, among East Asian countries, South Korea has not been able to sustain its growing trend and instead declined in 2014 and then stalled. Japan shows a similar equalisation trend and has been declining since 2014 as well. After strong gains since 1996, particularly for South Korea, both reached their best position in 2012 or 2013, but in 2015 both dropped back to the levels recorded in 2010 for South Korea and 2006 for Japan, with Eq-Idx of 66 and 67 respectively. Singapore in contrast has been able to sustain a growing Eq-Idx, and despite a drop in 2013, it has now been able to recover and reach its best position ever, with a 78 index in 2015. §In line with the current trend, Australia reached its best equalisation in 2013 (88) and then stalled in 2014 and 2015. The Australian dollar devalued 6,3% in 2014 and almost 16,7% in 2015 for a total devaluation of almost 22% for the period. Yet, a drop of 20% in the PPP cost of living in U.S. dollar terms, enabled Australia’s manufacturing wages to only drop from an EQ-Idx of 88 in 2013 to 87 in 2014 and 2015. The UK has lost another two points since 2013, and it is now 18 points behind its best Eq-Idx of 2006, by producing legions of cheap workers, or, as Guy Standing would say: “the Precariat”. Canada continued at its lowest level since 1996 with a 79 Eq-Idx. §Due to the devaluation of the euro against the dollar, France, Italy and Spain have reached a plateau at their highest or close to a highest Eq-Idx since 2012. Germany has also stalled, but unlike the other economies, it has done it ten points below its highest level, recorded in 2000 (131). Despite the stagnation trend, France was able to remain at its highest Eq-Idx level in 2015. §Brazil has no longer sustained its Eq-Idx due to the deep recession that has ensued in the last years. This has devalued the Real since 2010 by 47,2% against the dollar. Brazil’s government has continued complying with its minimum wage appreciation law, which increased its nominal value 72,5% since 2010 vis-à-vis a 38,4% increase of its consumer price index. The increase of the minimum wage has had a direct effect on manufacturing wages and the Real’s devaluation has lowered the PPP 32,7% since 2010. This has allowed Brazil to record an Eq-Idx increase in 2014 and then only a slight drop of two points to an Eq-Idx of 34 in 2015, despite the recession. §There is nothing new in Mexico’s performance. Mexico’s track record since 1996 (and since 1985 if we look back at production-line hourly wages) exposes a deliberate State policy of maintaining real wages at the level of modern-slave-work wages. This can be observed by comparing its 26 Eq-Idx in 2015 with its lowest and highest indices (25 and 27 respectively) since 1996. There has been virtually no change in equalisation terms for the entire nineteen-year period. This makes Mexico, barring the Philippines, the country with the worst living-wage equalisation position of the 33 countries in the three regions of our livingwage gap assessments.
140
Equalisation Index with the US - Real Manufacturing Hourly Wage Rates via PPPs
105
70
35
0
1996
2000
US Benchmark United Kingdom
2002
2004
Canada Spain
2006
South Korea Mexico
2008
Japan Brazil
2010
France Australia
2012
2014
Germany Singapore
2015
Italy
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Political context of the state of manufacturing wage rates in Mexico As expected, Mexico’s governments, permanently challenged for their accession to power through fraudulent elections in 2006 and 2012, continue deliberately violating the entire spectrum of civil, political, economic, social, environmental and cultural rights of their citizenry §
As it has become customary every year in our assessments, we have no alternative but to continue denouncing the premeditated and carefully designed labour policy –since the 1980s– of Mexico’s mafia-like governments. These governments have literally acted as captors of Mexico, seizing the “demos”, deliberately seeking to pauperise Mexico’s labour force and seizing all natural resources. Their unrelenting malfeasance, leaves no alternative but to continue exhibiting its nefarious consequences on the real wages of workers and the huge wage gaps with equivalent workers in the US. Barring the Philippines, Mexico has the worst wage gap of the 31 countries included in our assessments. Assessing the wages of Mexico’s manufacturing sector since 1975 irremediably exhibits the exploitative and repressive character of the group that has wielded real power for over three decades. This is a corrupt and treasonous elite that has completely submitted itself to international financial capitalism and the interests of its corporations. Willingly and enthusiastically it acts as its market agent in exchange for securing its full support to remain in power. This ethos stands out on a global scale for the tremendous erosion of labour rights. The illegitimate and robber-baron nature that accurately portrays the Mexican state, has imposed an ethos of modern-slave-work, of near labour bondage that drags the country back to conditions prevailing before the social revolution of 1910. These are its most conspicuous features:
§
Every year, labour policy maintains real wages at their lowest level by blocking any increase above inflation, despite the fact that real wages for manufacturing workers have been pulverised consistently since 1980. This is possible because the consumer price index (CPI) for the basic goods consumed by working families is much higher than the inflation index for the entire economy. This wage erosion trend is extremely consistent with the data reporting on the wages of all employed in manufacturing since 1996. Mexico’s 2015 equalisation index in particular (26) is equally one point above and below its lowest and highest indices recorded in twenty years. Thus, virtually it has not moved, unlike the case for most countries, which have shown marked improvements in equalisation.
§
To accomplish this, the state has unleashed a policy, increasingly more repressive, of labour rights violation. The repression has centred on the destruction of trade unions, the harassment of their leaders and the blatant violations of labour law, given the state of absolute impunity prevailing in Mexico, with the full international support of the governments of “partner” countries. The ILO’s core conventions, ratified decades ago by the Mexican state, are violated customarily. Miners, energy workers and farm day labourers have endured one of the most systematic repressions. A recent series on Mexico’s labourers published by the Los Angeles Times provides a vivid and accurate account of sheer labour bondage as the standard enjoyed by employers in Mexico, with the full support of the state (http://www.latimes.com/la-bio-richard-marosi-staff.html). NAFTA is a true disaster, but the real losers are the Mexican workers, who subsidise U.S. wages and consumer prices with modern-slave-work wages, with millions losing their livelihoods, and many forced to migrate to the U.S. (See: Felicity Lawrence: Trump is right: NAFTA is a disaster. But U.S. workers aren’t the big losers. The Guardian, 18 November 2016). The Mexican State has effectively betrayed Mexico by imposing predatory trade agreements, well aware beforehand that such agreements would destroy the social fabric, surrender natural resources and convert the vast majority of the population into a huge mass of Guy Standing’s “precariat”
§
At the core of these repressive policies lies the true motives of a, by all means, Mafia state. The Mexican state abandoned decades ago any responsibility before its citizenry and openly acts as an agent of domestic and foreign capital, from where it obtains the legitimacy that it did not achieve in the electoral process. To bring this about, its economic policies have been inflexible for decades, designed for the exclusive benefit of institutional investors. They demand high rates of return (6%), well above those offered by the leading financial markets, low inflation and a stable exchange rate to protect their investments. In this way, whilst real wages were reduced by more than 50% since the last century and the economy recorded one of the worst recessions worldwide (estimated at -4,7% of GDP in 2009), the state proudly brags about record foreign reserves of around US $180 billion (October 2016), resulting, in a substantial portion, from foreign investments in variable income instruments, which can fly away at any time as they have done previously.
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Political context of the state of manufacturing wage rates in Mexico § As a consequence, the country has suffered a terrible transformation in the components of job generation, for it is estimated that at least 58% of the economically active population worked in 2015 in the informal sector according to the government’s own data (INEGI – BOLETÍN DE PRENSA NÚM. 340/16 12 DE AGOSTO DE 2016) and to the OECD, which estimates that up to 63% of total employment is informal (Employment Outlook 2011 – How does Mexico compare? OECD, 2011). To be sure, wages and other labour compensations of those making a living in this sector occur in much worse conditions than those prevalent in the manufacturing sector addressed in this assessment. Furthermore, the new fraudulent government –elected through many major electoral code violations– passed a new labour law reform on 30 November, 2012, a day before it was sworn in. The reform imposes a sheer flexibilisation of hiring and lay off practices and the use, for the first time, of hourly minimum wages. This would allow employers to pay lower wages as long as they pay the full daily minimum wage, which has lost 80% of its real value since 1976 (Universidad Iberoamericana: Informe Anual del Observatorio de Salarios 2016). Mexico’s minimum wage for 2016 amounts to $3,81 (P $73,04) for an 8-hour shift. This is equivalent to about $0,48/hour or 6,6% of the US minimum wage, despite the fact that México PPP for private consumption is 60% of the US, which would require Mexico’s minimum wage to be of $4,35/hour to be at par in purchasing power with the US minimum wage; something that does not even take into consideration that the US minimum wage is also far from being a living wage. Clearly, Mexico’s minimum wage is of a labourbondage compensation nature. § A domestic perspective. To put TLWNSI’s living wage equalisation concept in a local context, we have assessed the real value of nominal wages of all employed in the manufacturing sector vis-à-vis an “indispensable basket of goods”. This basket (or CBI by its Spanish-language acronym) is an academic standard developed to measure the purchasing power of wages and as a reliable indicator to assess poverty. We are applying the latest report from the “Wage Observatory Centre” of Universidad Iberoamericana (UIA), on the assessment of the cost of the CBI performed in the city of Puebla, the fourth-largest city in the country and representative of the average cost of living in Mexico. The CBI is composed of a food-items basket and a non-food-items basket (a combined food and other basic items basket for a household of four). The CBI is assessed as the bare minimum necessary for the reproduction of the workforce. Typically, this assessment is performed against Mexico’s minimum wage. In the Centre’s 2014 field survey, the combined monthly cost of both baskets was P$16.444,76. In 2014 the monthly minimum wage was P$2.018,70, which could afford 12,3% of the CBI (Informe 2014 del Observatorio de Salarios, Universidad Iberoamericana, Puebla). In other words, to buy the CBI workers required 8,15 minimum wages in 2014. However, according to INEGI, the government’s statistics institute, 76% of all salaried workers earned five minimum wages or less, only 8,4% earned more than five minimum wages and 15,5% did not disclose their income (INEGI: Indicadores estratégicos de ocupación y empleo, ENOE 2014). Thus, we can very conservatively assert that at the very least 80% of all salaried workers could not afford to buy the CBI in 2014. Indeed, Mexico’s wage policy has been so predatory over the decades, that Mexico’s minimum wage is now the lowest in the Americas, only at par with Nicaragua ($110 vs $109 US dollars per month) (Expansión \ datosmacro.com, consulted on 2/11/2016). Lastly, if we measure the affordability of the CBI with manufacturing wages, the best wages in the economy, they could not afford to buy it as well. Indeed, the monthly cost of this CBI in dollars in 2014 was $1.237,20. Applying the CBI costs to the hourly direct pay of $4,75 (not counting taxes, social or company indirect benefits) of all employed in manufacturing in Mexico, shows that not even these workers –the best paid– were able to afford it. Using 40 hours per week shifts over 4,33 weeks in a month would only buy 66% of this CBI. § In another assessment of the affordability of a basic basket of goods, the Universidad Obrera de México (UOM), periodically measured the affordability of their indispensable basket of goods for a household of five in Mexico City. In January 2013 the minimum wage could afford 10,13% of the CBI, down from 49% in 1994, a 79% loss of purchasing power in 20 years (1) STPS: Salarios Mínimos Vigentes 1994-2014; 2) Laura Juárez Sánchez: Política económica neoliberal y salarios, Trabajadores, Universidad Obrera de Mexico VLT, Vol. 61, julio-agosto de 2007: 3) Laura Juárez Sánchez: Violencia económica en contra de los trabajadores mexicanos, Revista Trabajadores, Universidad Obrera de Mexico, VLT, Noviembre-Diciembre 2011, Número 87). The daily cost of the CBI in dollars was $9,15 in 1994, $23,86 in 2009, $40,12 in 2011 and $50,04 at the start of 2013 (extrapolating our own calculations for 2013 based on: reporte CAM_UNAM 109, p. 14, Cuadro No.5, June 2013), a 447% increase in nineteen years. Applying the CBI costs to the hourly direct pay (not counting social or company indirect benefits) of all employed in manufacturing in Mexico shows that while they were able to afford 95% of the CBI in 2009, they could only afford 65% in 2011 and 55% in 2013, a loss of 44% of their purchasing power in just four years. Both in the case of the UIA’s CBI for a household of four in 2014 and of UOM’s CBI for a household of five in 2013, the net monthly income of a head-of-household in the manufacturing sector is far from affording the cost of these CBI’s. Clearly, as illustrated for UOM”s CBI on the charts in the next page, the wages for all workers including all employed in manufacturing have been pauperised and permanently converted into hunger wages. Even the staunchly neoliberal Economist magazine openly criticised Mexico’s minimum wage policy as designed to hurt workers (Mexico’s minimum wage; stingy by any measure, The Economist: 16 August 2014). § Absence of the Rule of Law. The desertion of Mexico’s governments, for the last three decades, from the basic responsibilities of any government that praises itself for being democratic, has imposed a “no-rule-oflaw state” or anomie: the collection of events that are engendered by the lack of social norms or their degradation; a sine qua non condition to act with complete impunity, thus, demolishing the state’s responsibility to maintain a “rule-of-law state”. As one of its consequences, a supposed war against drug trafficking was launched in 2007, which officially engendered –as of December 2012– 122 thousand homicides (since 2007) according to the government’s INEGI. The same policy prevails with the current government, which officially acknowledges 64 thousand homicide casualties between 2013 and 2015 (INEGI, Mortalidad. Conjunto de datos por homicidios. Accessed data on 4-XI-2016). In 2014, a number of massacres, extensively covered by the Mexican and international press, such as the massacre of 43 students in Guerrero state, most likely perpetrated by local and federal police as well as the army, have exacerbated the state of anomie prevailing for most of the century. § A deliberate predatory and plundering economic policy. It must be clear that the dire results rendered in the labour’s share of income are not due to a failure in economic management but to a deliberate economic policy of plundering. Since 1981, when production-line wage rates achieved their highest index in Mexico, they initiated a constant erosion in PPP terms –vis-à-vis their equalisation with the purchasing power of equivalent US wage rates– dropping to half of its 1981 equalisation index by 2009. This is possible due to the full support of employers by the state through its customary policy of pauperisation, to which it adds its new policy of social intimidation, as it has become increasingly evident that the true goal of the war against drug trafficking is to inhibit social outcry –by intimidating the population– in order to enjoy a free reign to continue depredating the country (Zózimo Camacho: La fuerzas armadas mexicanas ante la amenaza estadounidense, Contralínea, 27 noviembre 2016). This has allowed the state to maintain the vast majority of workers under modern-slave-work conditions. Yet, in 2011, 23.000 Mexican citizens filed a complaint with the International Criminal Court in The Hague, requesting an investigation of, at the time, President Calderon and his top officials for the deaths of hundreds of civilians at the hands of the military, accusing them of allowing subordinates to kill, torture and kidnap civilians. Many alternative and reliable sources assessed that the 60.000 casualties officially recognised at the end of 2012, were actually above 100.000, as it was later reported by the goverment’s INEGI, as detailed in the preceding paragraph. The current Peña Nieto administration bears a similar track record of human rights violations, repression, corruption and impunity that has characterised Mexican administrations for most of their history, with the full support of the “international community”. § At the end of 2016, there was a slight signal that, given the extremely dire situation of wages in Mexico, the government finally devised a way to not look so bad and apparently recover slightly the real value of the minimum wage. In a poorly explained press release, the minimum wage for 2017 will be increased arbitrarily by MX $4,00, as a result of a so-called “Independent Recovery Amount” (MIR in Spanish) and then a 3,9% will be applied to offset the estimated GDP inflation rate. In this way, the minimum wage will increase by 9,58% from MX $73,04 to Mx $80,04 per day (Comisión de Salarios Mínimos: Boletín de Prensa: http://www.gob.mx/cms/ uploads/attachment/file/170367/2016DICIEMBRE01-FIJACION_2017.pdf). There is no indication of the criteria for the MIR nor if this will be applied on an annual basis or what exactly the government plans to achieve with this action.
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Political context of the state of manufacturing wage rates in Mexico Cost of UOM’s Basic Basket of Goods (BBG) versus daily minimum and manufacturing wages in Mexico $60
U.S. dollars
$50 $40 $30 $20 $10 $0
1994
2006
2007
2009
Daily BBG cost
2010
2011
Daily minimum wage
2012
2013
Daily manufacturing wage
Percent of cost of UOM’s BBG covered by net wages 140% 117% 93% 70% 47% 23% 0%
1994
2006
2007
2009
2010
Daily minimum wage
2011
2012
2013
Daily manufacturing wage
Sources: (1) STPS (Mexico’s Secretary of Labour): Salarios Mínimos Vigentes 1994-2014; 2) Laura Juárez Sánchez: Política económica neoliberal y salarios, Trabajadores, Universidad Obrera de Mexico VLT (UOM), Vol. 61, julio-agosto de 2007; 3) Laura Juárez Sánchez: Violencia económica en contra de los trabajadores mexicanos, Revista Trabajadores, Universidad Obrera de Mexico, VLT, Noviembre-Diciembre 2011, Número 87); (extrapolation of our own calculations for 2013 based on: reporte CAM_UNAM 109, p. 14, Table No.5, June 2013); 4) U.S. Department of Labour and The Conference Board: International Comparisons of Hourly Compensation Costs for all employed in Manufacturing, 1996-2013.
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Main features of the state of manufacturing wage rates in Mexico §
Wage rate equalisation track record since 1975. Mexico achieves its least precarious wage rate equalisation in 1981, when productionline (PL) manufacturing wage rates reached an equalisation index of 45 over their 100 goal. Yet, starting in the 1980s the Mexican state surrenders to the guidelines of the World Bank and the IMF, the institutions in charge of imposing the Washington Consensus to –evidently undemocratic– governments wishing to obtain legitimacy through their recognition by the metropolises of global capitalism. As a result, Mexico’s manufacturing real wage rates endure a systematic policy of erosion that gradually makes them lose more than half their value. In 1995, after the debacle of the economic policies of the Mafia state, real wage rates dropped to their worst level since 1975, with an equalisation index of barely 19 with their US counterparts. Subsequently, PL wage rates recovered slightly (27) to then drop again to 24, 25 and 23 for 2005, 2007 and 2009 respectively. In this way, from a 45 index in 1981 to 23 of 2009, Mexican production-line wage rates lost 49% of their already meagre purchasing power equalisation with the wage rates of their US counterparts. Hourly wage data published by the US Department of Labour for production-line workers is not available for subsequent years. In the case of all workers employed in the manufacturing sector –since we can no longer track wage rates for PL workers– their wage rates continue to show the exact same trend. The data available only goes as far as 1996, but it is clear that wage rates for all employed in manufacturing have eroded at even a worse pace than those for PL workers, even if we lack the data to use 1975 as the historic indicator. This is a realistic assumption given the fact that the gap between PL and all employed in manufacturing wage rates has been diminishing downward. While in 1996 the hourly wage rates of all employed in manufacturing was 61,3% higher than for PL workers, in 2000 it dropped to 55,6%, in 2006 to 50,8% and by 2009 it had dropped to 49,6%. Thus there is a consistent erosion of the wage rates of all the workers not employed in production. This erosion is causing their wage rates to gradually and downwardly close in with those of the workers employed in the production area of the manufacturing sector.
§
Comparison with South Korea. The case of South Korea, included in pages 10, 11 and 12, clearly shows the great difference in the performance of the wage rates for all employed in manufacturing in their equalisation with those of their US counterparts vis-à-vis Mexico’s wage rates. Yet, because they only go back to 1996, their performance is not nearly as dramatic as that for production line-wage rates in past reports, which start in 1975. For production-line workers, South Korea’s outcome could not be more divergent with Mexico’s, for its equalisation index in 2009 was almost three times greater than Mexico’s (65 over 23), whilst in 1975 South Korea’s equalisation index was barely 30% of Mexico’s (11 vs. 37). The contrast was even more dramatic before the crises, for in 2007 the relationship was more than three times in favour of South Korea (83 over 25). This contrast becomes all the more evident when comparing the mutual proportion of PPP real wage rates of both countries between 1975 and 2009. In 1975 México’s production-line real wage rates were 3,5 times South Korea’s. By 2009 we observe an inverse relationship, for South Korea’s wage rates were 2,9 times Mexico’s. As for all employed in manufacturing, in 1996 Mexico’s real wage rates were 53% of South Korea’s, but by 2015 they were down to only 39% (page 23). This exposes how a state committed to social wellbeing can make real wages reach the ranks of those of the major economies. Instead of surrendering its labour market to the guidelines of the Washington Consensus to apply a modern-slave-work model, South Korea chose endogenous development by strengthening its domestic market's aggregate demand and opening competitive economic sectors only, which led South Korea to become competitive in global markets too. (Alice H. Amsden: Asia’s Next Giant: South Korea and Late Industrialisation, Oxford University Press, 1989) and Álvaro J. de Regil: South Korea’s tortuous road towards a living-wage ethos, A TLWNSI Living Wage Assessment, The Jus Semper Global Alliance, October 2013.
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Main features of the state of manufacturing wage rate in Mexico § Comparison with Argentina. Argentina’s case exhibits once again the decay of Mexican wage rates and the exploitative nature of Mexico’s Mafia state. There is no data for production-line wage rates in Argentina, but the data for all employed in manufacturing is quite eloquent in exposing the demise of Mexico’s wage rates. In 1996 Argentina’s equalisation index with the US was not much higher than Mexico’s (32 vs. 25). During its deep economic crises of 2002, Argentina’s equalisation index was barely better than Mexico’s (30 vs. 27). Yet by 2013, Argentina’s real wage rates were 2,2 times those of Mexico, whilst Mexico’s were barely 46% of Argentina’s (page 26). Since 2002, when Argentina’s equalisation index was at its lowest point (30) and its PPP real wage rates were barely 9% above Mexico’s, nominal wages have increased dramatically, clearly above inflation. There is much controversy about Argentina’s official inflation rate, and the government has been accused of manipulating the data. Most analysts question the official rate (between 2008 and 2015) reported by INDEC, the official statistics bureau responsible for this metric. While INDEC reported a 14,4% inflation rate as of October 2015, most estimates double it. The “Billion Prices Project” from MIT reckons real inflation for 2015 to be at 26,8%, which is still less than the 33,5% nominal rate increase of the manufacturing wage rate recorded in 2015. This makes the PPP, based on real inflation estimates, to be at around $1,02 in 2015. That would make the wage equalisation index a 54 instead of around 80 if we take the official rate. The controversy notwithstanding, Argentina’s wage rates in the manufacturing sector increased, between 2010 and 2015, 62,6% nominally and 13,8% in PPP real terms (in US dollars). This produced a 3 point increase of its Eq-Idx for the same period. In this way, Argentina’s manufacturing hourly wage rate has improved dramatically its equalisation with the equivalent rate in the US, since 1996, for it has increased 69% (from 32 to 54) using realistic inflation estimates. In great contrast, Mexico’s wage rates in the manufacturing sector dropped between 2010 and 2015 by -3,9% nominally and increased 13,1% in PPP real terms (in US dollars), with its Eq-Idx gaining one point for the period. By the same token, Mexico’s manufacturing hourly wage equalisation index has moved 4%, the same index as in 2004 and lower than in 2000-02, 2006-2008 and 2014, hardly a change. The contrast in the results are dramatic and clearly exhibit the stark divergence in labour policy. § Behaviour of comparative indices of manufacturing hourly real wage rates of each country vis-à-vis the equivalent Mexican wage rate. When performing the preceding comparison with the economies selected for this assessment, there is a clearly consistent trend for each of the countries (Singapore, Brazil, Australia and Argentina: page 26), (Japan, South Korea and Canada: page 27), (Spain, Italy and France: page: 28), (Germany, United Kingdom and United States: page 29) in which almost all countries increased their advantage in their comparative indices vis-à-vis the Mexican equivalent real wage rate after 2002. Of the thirteen economies in this assessment, nine ended up with a higher real wage rate index in 2015 than in 1996 against Mexico’s real wage rate. The U.S. almost sustained its advantage and only Canada, Germany and the UK had any meaningful loss in its real wage rate advantage over Mexico. However, all except the UK recorded higher ratios in their comparative advantage over Mexico’s manufacturing real wage rates in 2015 than in 2008, at the beginning of the global depression. This is due to the clear pegging of Mexico’s nominal wage rate increases to the inflation rate. Indeed, between 2008 and 2015, Mexico’s nominal wage rate in local currency increased annually an average of 3,8% whereas the official inflation rate for the entire economy grew by an average of 4,08%, which does not take into consideration the fact that private consumption inflation is much higher than GDP inflation. § Relative to the United States –which acts as the benchmark for purchasing power parities and, consequently, for wage rate equalisation– the trend is also highly consistent, for its wage rate indices with Mexico –between 2002 and 2015– increased from 367 to 383. Consequently, Mexico’s deliberate policy of real wage containment guarantees that its living wage rate equalisation gap with the the US, its major trading partner, accounting for 80% of its trade, has all the odds in favour of being sustained or even of getting worse, if the US decides to increase real wage rates however little (page 29).
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The chart below provides a complete illustration of the behaviour of Mexico’s wage rates for all employed in manufacturing vis-à-vis U.S wage rates since 1996. Mexico’s nominal and real wage rates tend to merge because the PPP cost of living has increased around one-third since 1996 until 2013. Thus, while the real to nominal wage ratio was 1,9 in 1996, by 2013 it had dropped to 1,4, but then the peso devaluation made the ratio jump to 1,7 in 2015. Concurrently, equalised wage rates continue to increase as nominal US wage rates sustain their annual growth up to 2013. As for the wage rate gap with equivalent US wage rates, it has remained virtually at the same level. Given that Mexico’s modern-slave-work policy deliberately contains real wages and virtually pegs them to the same Eq-Idx since 1996, the ratio between the US wage rate and Mexico’s real wage rate has remained almost the same for the entire period (1996: 3,92 to 1 vs. 2015: 3,82 to 1).
Gap between manufacturing hourly wage rate and PPP equalisation index with real US wage rate 40
$34,75
$32,78
Current U.S. dollars
30
27
25
25
$22,47
27
$23,49
20
27
26
$24,96
$30,48
$29,31
$27,36
$20,49
27 25
$20,14
$37,71
$37,04
$36,34
$35,64
25
$24,00
$24,49
$8,84
$8,71
27
26 $24,95
$26,68
26 $25,36 $22,58
$21,63
$17,58 $14,22 $11,96
10
$6,67
$5,90
$5,73
$3,05
$3,57
1996
1998
$4,70
$7,65
$7,46
$8,28
$9,07
$9,29
$9,87
$5,59
$5,26
$5,88
$6,47
$6,14
$6,35
$6,82
$6,76
2002
2004
2006
2008
2010
2012
2013
2014
$9,85
$5,90
0
2000
Equalisation Index
US benchmark
Mexico equalised wage rate
Mexico nominal rate
2015
Mexico real rate
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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The chart below further illustrates the policy of wage rate containment followed by Mexico in the case of all employed in the manufacturing sector. Mexico’s equalised PPP nominal wage rate in 1996 needed to be $11,96 to be at par with the US wage rate of $22,47. Since the US wage rate has climbed to the level of $37,71 in 2015, Mexico’s equalised PPP nominal rate needed to climb to $22,58. Yet, since the policy is to maintain the same equalisation gap assessed in 1996, Mexico’s nominal wage rate of $3,05 needed to increase only to the level of $5,75, or an increase of 89%. The actual increase of the nominal wage rate by 2015 was of $5,90, equivalent to a 93% growth –a negligible difference. This of course does not illustrate that, prior to the 20 years of wage containment, real wages were systematically eroded from their far less unequalised position, as was observed for production-line workers as well as workers in all economic sectors as explained in the preceding pages.
Comparison of nominal hourly wage rates of Mexico’s manufacturing workers to close the gap or maintain the 1996 gap with US counterparts and actual results (US dollars) $22,47
U.S. Wage rate
$37,71
$11,96
Mexico’s rate equalised to close the gap
100% 100%
$22,58
$3,05
Mexico’s rate to maintain the same gap
25,5% $5,75
$3,05
25,5%
25,5%
Actual result of Mexico’s rate $5,90
25,5%%
$0,00
$13,33
1996
$26,67
$40,00
2015 Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
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Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent US real wage rates (current dollars) 30
23
Size of gap between nominal and equalised wage rate
15
8
0
1996
1998
2000
2002
2004
Mexico Equalised Wage Rate
2006
2008
2010
2012
2014
2015
Mexico Nominal Wage Rate
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Gap between equalisation index and size of manufacturing hourly real wage rate gap in Mexico vis-à-vis US real wage rate 0,8075%
75%
73%
73%
74%
73%
73%
27%
27%
26%
27%
27%
2000
2002
2004
2006
2008
75%
75%
25%
25%
2010
2012
73%
74%
27%
26%
2014
2015
0,60
0,40
0,2025%
25%
0,00 1996
1998
Size of gap
Equalisation index
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent US hourly wage rate of Mexico and South Korea for all employed in the manufacturing sector (1996-2015) 80
60
40
20
0
1996
1998
2000
2002
2004
2006
South Korea
2008
2010
2012
2014
2015
Mexico
Equalisation index comparison in PPP terms of hourly real wage rate with equivalent US hourly wage rate of Mexico and South Korea for production-line workers in the manufacturing sector (1975-2009) 90
68
45
23
0
1975
1980
1985
1990
1995
South Korea
2000
2005
2007
2009
Mexico
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Mutual proportion comparison of PPP real wage rates between Mexico and South Korea for all employed in the manufacturing sector (number of times) 3 2,13
2,30
2,37
2,61
2,78
2,49
2,54
2,00
1,98
1,97
0,53
0,50
0,51
0,51
0,47
0,44
0,42
0,38
0,36
0,40
0,39
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2015
2 1,88 2 1 0
Mutual proportion comparison of PPP real wage rates between Mexico and South Korea for production-line workers (number of times) 4
3,46
3,22
3,16
3
3,31 2,85
2,73
2,79
0,37
0,36
0,32
0,30
0,35
1995
2000
2005
2007
2009
1,82
2
1,22
1
0
0,29
0,31
1975
1980
0,55
1985
0,82
1990 Mexico
South Korea Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent US wage rate of Mexico and Argentina (using unofficial inflation rates for Argentina)
60
45
30
15
0
1996
1998
2000
2002
2004
2006
Argentina
2008
2010
2012
2014
2015
Mexico
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Mutual proportion comparison of PPP real wage rates between Mexico and Argentina (number of times using unofficial inflation rates for Argentina) 2,18
2
2,06
2,05 1,94
1,88 1,68 2
1,24
1,33
1,35
1,29 1,09
1
0,92 0,80 1
0
0,75
0,78
0,74 0,59
1996
1998
2000
2002
2004
2006
0,53
2008
Mexico
0,49
2010
0,46
2012
0,51
2014
0,48
2015
Argentina
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Behaviour of comparative indices of manufacturing hourly real wage rates of each country vis-à-vis the equivalent Mexican wage rate (Mexico = 100) 331
329
252
332
244
244
251
2000
2002
2004
223
326
269
265
2008
2010
277
286
297
239
318 312
311 306
306 302
1996
2000
2002
2004
2006
2008
2010
2012
2014
2015 1996
1998
Australia
2006
131 112 102
106
109
119
2014
2015
Singapore 152
131
2012
126
136
205
134
218 195
188
206
168 124
133
135
129 109
*1996 Brazil data has been compared with 1995 Mexico data.
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
1996
1998
Brazil
2000
2002
2004
2006
2008
2010
2012
2014
2015
Argentina Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
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Behaviour of comparative indices of manufacturing hourly real wage rate of each country vis-à-vis the equivalent Mexican wage rate (Mexico = 100) 265 260 256
261
249 245
230
240 237
188
237
249
254
2014
2015
213
200
198
197
1998
2000
2002
232 229
221 1996
1998
2000
2002
2004
2006
2008
2010
2014
2015
Japan 352
353
1996 321 316
313
1996
1998
2000
2002
2006
2008
300
2010
2008
2010
South Korea
297
2004
2006
311
304 295
2004
2012
2014
303
2015
Canada Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Behaviour of comparative indices of manufacturing hourly real wage rate of each country vis-à-vis the equivalent Mexican wage rate (Mexico = 100) 296 292 285
286 330
356
355
2010
2012
336 310
273
313
306
2004
2006
289
339
340
2014
2015
315
269 264
265
2004
2006
261 257 253
1996
1998
2000
2002
2008
2010
2012
2014
2015
Spain 395 389
386
383
378
375
1996
1998
367
2000
2002
2008
Italy 357
354 349 337
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2015
France Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Behaviour of comparative indices of manufacturing hourly real wage rate of each country vis-à-vis the equivalent Mexican wage rate (Mexico = 100) 507
513
491
473 436
428
450
476
455
464
422
315
303
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
313
302
318
315
304 287
278 254
261
2014
2015
2015
Germany 399
398
393
392
1996 383
1998
383
200
2002
2004
2006
2008
2010
2012
United Kingdom
375
374 371 368
367
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2015
United States Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Performance of equalisation indices of manufacturing real wage rate and behaviour of PPP indices
§ Performance of equalisation indices of Mexico’s PPP manufacturing hourly real wage rate vis-à-vis the rate of its US counterparts and behaviour of Mexico’s purchasing power parity indices. In the following charts (pages 31-35) it is clearly observed that in the case of Mexico –in great contrast with the other countries– there is no relationship between wage equalisation and PPP indices. If in 1996 the equalisation index was 25 and the PPP 53, by 2002 the PPP had climbed 42% to its highest position (75) but the Eq-Idx increased barely 8% to its highest point (27). Thus PPP cost of living increased by more than two fifths but the Eq-Idx barely improved. Then, the PPP levelled off between 2008 and 2013 to then drop, yet the Eq–Idx barely moved. The PPP is based on surveys of the consumer price index to assess inflation for private consumption from a global perspective. From a domestic perspective, as this report has shown, the cost of the 40 items of a CBI (indispensable basket of goods) increased 447% between 1994 and 2013, becoming unaffordable for the vast majority of workers, including those employed in manufacturing (pages 14 and 15). An assessment of the behaviour of the PPP and the Eq-Idx shows that, regardless of surges of the PPP or its drop since 2013, the Eq-Idx has remained constant at an extremely narrow band of 25-27 for twenty years. This is explained by the fact that, as a public policy, real wages have remained deliberately at practically the same Eq-Idx. This is because this is the level of Eq-Idx that is deemed by governments and employers to be competitive in global markets for the benefit of shareholder value at the expense of workers who are deliberately doomed to permanently endure modern-slavework wages. Needless to say that, consequently, the relationship between the Eq-Idx and the PPP is clearly wider in 2015 than in 1996. § This does not hold true in the relationship between the same indicators for most countries. In addition to Mexico, only Australia, Canada and the UK –coincidentally all Anglo-Saxon countries– and now Germany show a wider gap between cost of living and equalisation indices in 2015 than they did in 1996 (pages 31 to 35). All other countries have a smaller gap between PPP and their Eq-Idx. Yet, barring Mexico, the PPP and Eq-Idx curves cross their path, meet or at least approach for all countries, keeping a more logical relationship. Indeed, in Mexico the lines of both indices never approach or cross patterns. For the entire 1996-2015 period, the Eq-Idx increased meaningfully in most countries; only in the UK, Canada and Germany the Eq-Idx is clearly lower. However, Germany is the only country that has always recorded an Eq-Idx above 100, it has never dropped below 113 and is now at 121 vis-à-vis 129 in 1996. Even in the case of Brazil, where the PPP cost of living has been more than double the PPP of 2002, the Eq-Idx managed to recover and surpass its previous record. In Mexico’s case, in contrast, the Eq-Idx draws a flat line for the entire twenty-year period, irrespective of the sharp increase of the PPP between 1996 and 2002, and the Eq-Idx never moves beyond a low of 25 and a high of 27. § These relationships and trends are not as dramatic in the case of all employed in manufacturing vis-à-vis production-line workers because the window of analysis is of only 20 years in the former whilst we have a 35-year window in the latter (1975-2009). In 1975 the PPP for Mexico was $0,78 (78%) and the Eq-Idx was 37 for production line-workers. By 2009 the PPP had dropped 18% to $0,64, and yet the Eq-Idx, instead of improving dropped sharply (38%) to only 23. In contrast, in most countries a drop in the PPP generally increases equalisation or at least keeps it at the same range. This analysis confirms once again the deliberate policy of the Mexican state to pauperise wages and to keep them at the level of modern-slave-work conditions.
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Performance of 1) equalisation indices of Mexico’s PPP manufacturing hourly real wage rate vis-àvis US counterparts, 2) behaviour of Mexico’s purchasing power parity indices (cost of living in PPP terms – US= 100) and index of 2 over 1 (1=100) 300 278 265
259
263
270
280
280
281 252
244
231
225 212
150
75
0
53
61
70
75
69
71
73
70
70
73
68
60
25
25
27
27
26
27
27
25
25
26
27
26
1996
1998
2000
2002
2004
2006
2008
2010
2012
2013
2014
2015
2) Mexico PPP Living Cost
1) Equalisation Index
PPP index over Eq-Idx
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Performance of Mexico’s equalisation indices of PPP manufacturing hourly real wage rate and behaviour of purchasing power parity indices (cost of living in PPP terms) with selected countries relative to their US counterparts 160
133 100
107
83
80
67
53
50
27
33 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Australia Equalisation
Australia PPP cost of living
17
1996 1998 2000 2002 2004 2006
100
Singapore Equalisation
83
2008 2010 2012 2014 2015
Singapore PPP cost of living
67 50 33 17
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Brazil Equalisation November 2016
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
Brazil PPP cost of living The Jus Semper Global Alliance (WGMex 96/15)
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Performance of Mexico’s equalisation indices of PPP manufacturing hourly real wage rate and behaviour of purchasing power parity indices (cost of living in PPP terms) with selected countries relative to their US counterparts 180 150 120
100
90 83 60 67
30
50 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Japan Equalisation
33
Japan PPP cost of living
110
17
92 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
73
South Korea Equalisation
55
South Korea PPP cost of living
37 18
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Argentina Equalisation
Argentina PPP cost of living
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Performance of Mexico’s equalisation indices of PPP manufacturing hourly real wage rate and behaviour of purchasing power parity indices (cost of living in PPP terms) with selected countries relative to their US counterparts 130 108 87 120 65 100
43
80
22
60 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Canada Equalisation
Canada PPP cost of living
40
130
20
108 1996
87
1998
2000
2002 2004
Spain Equalisation
65
2006
2008
2010 2012
2014
2015
Spain PPP cost of living
43 22
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Italy Equalisation
Italy PPP cost of living Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
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Performance of Mexico’s equalisation indices of PPP manufacturing hourly real wage rate and behaviour of purchasing power parity indices (cost of living in PPP terms) with selected countries relative to their US counterparts
140 117 93
140
70
117
47
93
23
70 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
United Kingdom Equalisation
United Kingdom PPP cost of living
47 23
140 117
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015 93
France Equalisation
France PPP cost of living
70 47 23
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015
Germany Equalisation
Germany PPP cost of living Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance
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Twenty-nine year projection of the closing of the real wage rate equalisation gap § Projection of real wage rate equalisation in the manufacturing sector for all employed in manufacturing between Mexico and the United States in the term of +/- thirty years, based on TLWNSI’s concept § Using the wage rate for all employed in manufacturing in the US in 2015 as the benchmark, the following chart (page 37) illustrates the average increase required to close the hourly real wage rate gap of these Mexican workers with their US counterparts, in PPP and dollar terms, in the term of thirty years or less, starting in 2016. The projection is made assuming a context of stable global economic conditions. This would be reflected in relatively low inflation rates for Mexico and the US. This would assume a sustained growth of Mexico’s economy in line with the US economy, averaging 3%, which is less than ideal for a middle-income country, due to its total dependency on the US economy. This would place Mexico’s average growth below the average for Iberian America. Even though the assumed average inflation rate of 5,5% is above that experienced between 2002 and 2015, it is still an optimistic assumption, given the inherent instability of the global system as well as of the administration of the state proper. Thus, it is likely that inflation will tend to increase as long as governments refuse to regulate the market –with a very visible and resolute hand– and insist on ceding control of the real economy to the casino-like speculative culture of the institutional investors of the financial sector economy. In this way, despite the absolute certainty of the occurrence of boom and bust periods, both in Mexico and globally, the projection assumes that Mexico’s economy will continue to grow at the mediocre average of 2,1% recorded since 2001, which we also consider relatively optimistic, for the reasons discussed above. § Criteria used in the projection: ➡Average US CPI (inflation): 2,5% (average of 2,2% between 2001 and 2015). ➡Average Mexican CPI: 5,5% (average of 4,15% between 2001 and 2015). ➡Real value of wages in the US remains constant, increasing nominally by 2,5%, annually, to neutralise inflation. ➡World Bank indicators recorded a PPP for private consumption of $0,59887683 for Mexico, equivalent to 59,9% of the US cost of living in 2015. ➡ The benchmarks –and starting point– used in this projection are the PPP manufacturing hourly real wage rates (total compensation cost for both economies for 2015: (U.S: $37,71 and Mexico: $9,85; and nominal wage rates: $37,71 and $5,90 respectively). ➡Real wage rate figures are shown at constant prices, reflecting future purchasing power after adjusting for inflation. ➡The projection is entirely estimated in U.S. dollars. Inflation is accounted for through the World Bank’s PPPs conversion factor for private consumption, and then projected to increase an annual average of 5,5% in U.S. dollars. PPPs are the rates of currency conversion that eliminate the differences in price levels between countries. § Results of the twenty-nine year projection: ➡ This projection at no time pretends to forecast what would be the inflationary indices, exchange rates or the rates of wage rate increases that will occur in Mexico or the US in the future. For this projection, the average behaviour of these indicators has been established in a discretionary manner –based on the data recorded since 1975– with the only purpose of projecting the level of nominal wage increases required under these assumptions to illustrate the closing of the living wage gap in Mexico. Parting from the assessment of the wage policy, reflected in the behaviour of real wages in the Mexican manufacturing sector since 1975, the probability that this projection materialises, under current State policy, is zero. ➡The chart on the next page shows the behaviour of real wage rates for both the US and Mexico over a twenty-nine year period. ➡Nominal wage rates in Mexico were increased an average of 10,5% annually until equalisation was achieved, assuming a 5,5% inflation rate. Results indicate that closing Mexico’s wage rate gap at a rate of 10,5% annually, 5% in real terms, under the above criteria, would allow manufacturing wage rates to achieve 100% equalisation in year 29 with an increase of 10,44% in that year. A nominal average increase of 5,5% would be required thereafter to neutralise the assumed average inflation of 5,5% and to keep equalisation with US wage rates under their assumed average 2,5% nominal annual increase. ➡ Not shown in the chart, the projection made Mexico’s cost of living in PPP terms in year twenty nine (2044) equivalent to 138,3% of the US cost of living – whereas it was 59,9% in 2015– due to the fact that the inflation rate for Mexico is assumed to be more than twice the US rate. ➡Closing the wage rate gap would cover the 2016 to 2044 span of time. November 2016
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Twenty-nine year projection of Mexico's equalisation of hourly real wage rates of all employed in manufacturing with wage rates of its US counterparts, at a nominal average annual increase of 10,5% (5% real) until year 29 Equalisation year 29
$110,00
100,0
83,1
$73,33
77,17
66,0 69,91 52,3 41,5 32,9
$36,67 26,1
61,79 54,62
58,12
48,27
42,67
40,76
37,71 28,58 20,04 9,85
14,05
$0,00 Year 0
5 years
U.S. Wage ($) –Avg. Inflation 2,5%
10 years
15 years
20 years
Mexico's PPP real wage ($) – Avg. Inflation 5,5%
25 years
29 years
Equalisation index reached
Not a forecasting analysis. This projection at no time pretends to forecast what would be the inflationary indices, exchange rates or the rates of wage rate increases that will occur in Mexico or the US in the future. For this projection, the average behaviour of these indicators has been established in a discretionary manner –based on the data recorded since 1975– with the only purpose of projecting the level of nominal wage rate increase required under these assumptions, to illustrate the closing of the living wage gap in Mexico. Parting from the assessment of the wage policy, reflected in the behaviour of real wage rates in the Mexican manufacturing sector since 1975, the probability that this projection materialises, under current State policy, is zero.
Sources: WB, U.S. BLS, TCB, OECD – © The Jus Semper Global Alliance November 2016
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Prospectus
•
Prospectus. As we are forced to repeat every year, the future of wage rates for all employed in the manufacturing sector in Mexico is absolutely ominous unless society removes from power those who have imposed the Mafia state and puts in place a citizen’s government of real democracy. Every year the government’s economic policies contain or further erode real wage rates. Additionally, the State has unleashed a policy of repression of the rights of freedom of association and to organise and collective bargaining. Contrary to what corporate media like to portray, the deep, deliberate and perverse pauperisation of Mexicans is an incontrovertible fact. Official data acknowledge that 81% of Mexicans are poor (Coneval 2009). By the same token, in 2014 the minimum wage was able to afford 12,3% of the goods of the CBI or indispensable basket of goods from UIA, (Informe 2014 del Observatorio de Salarios, Universidad Iberoamericana, Puebla), which is deemed essential for survival. Moreover, the current government has maintained since 2013 the customary policy of strong price increases in the energy sector, which guarantees a greater pauperisation of real wages. Parting from these findings, it is estimated –with a great degree of confidence– that less than 20% of all salaried workers could afford the CBI in 2014. This prospectus remains with exactly the same tone conveyed in previous reports since 2007, for the deprivation, depredation and deliberate pauperisation – as a State policy– continue deepening.
•
The government’s recent decision to add an arbitrary amount to the minimum wage above GDP inflation, with no evident rationale other than to support the income of workers earning the minimum wage, seems only a token to cope with the unrelenting denunciation, domestically and internationally, of its modern-slave-work wage model. It is necessary to wait and see if a well articulated policy is announced in 2017 to understand what the government intends to achieve.
•
In summary, three decades of predatory capitalism in Mexico exposes, decisively, a government's policy –from the perspective of manufacturing wage rates in particular and all wages in general– of a perverse and premeditated pauperisation and exploitation of Mexican labour, for the only public policy of the Mafia State is to govern for the benefit of domestic and foreign institutional investors and their corporations. In this way, as long as the “robber baron” elites currently in power remain in control, the deepening of the pauperisation of Mexico’s demos is more than guaranteed. The predatory ethos is so perversive and entrenched in the captors of Mexico, that the odds in favour of making the closing of Mexico’s living-wage gap a reality in the term of twentynine years is currently zero.
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The Jus Semper Global Alliance – Living-Wage-Gap and Equalisation analysis (vis-à-vis the U.S.) for all employed in manufacturing in purchasing power parity terms for private consumption for selected economies 1996-2015
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The Jus Semper Global Alliance – Living-Wage-Gap and Equalisation analysis (vis-à-vis the U.S.) for all employed in manufacturing in purchasing power parity terms for private consumption for selected economies 1996-2015
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The Jus Semper Global Alliance – Living-Wage-Gap and Equalisation analysis (vis-à-vis the U.S.) for all employed in manufacturing in purchasing power parity terms for private consumption for selected economies 1996-2015
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*Definitions:
v PPPs stands for Purchasing-Power Parities, which reflect the currency units in a given currency that are required to buy the same goods and services that can be purchased in the base country with one currency unit. This analysis uses the U.S. and the U.S. dollar as the benchmark and assumes that the U.S. wage is a living wage. v The hourly manufacturing wage rate is the "hourly compensation cost" as defined by the U.S. Department of Labour, Bureau of Labour Statistics: This includes (1) hourly direct pay and (2) employer social insurance expenditures and other labour taxes. Hourly direct pay includes all payments made directly to the worker, before payroll deductions of any kind, consisting of pay for time worked and other direct pay. Social insurance expenditures and other labour taxes refers to the value of social contributions incurred by employers in order to secure entitlement to social benefits for their employees. v PPP conversion factor, (private consumption) in country currency express the number of country currency units required to buy the same goods and services a U.S. dollar can buy in the U.S. v Exchange rate is nominal exchange rate. v PPP conversion factor, private consumption in U.S. dollars expresses the U.S. dollar units required in a given country to buy the same goods and services a U.S. dollar can buy in the U.S. If the PPP is less than 1, a U.S. dollar can buy more in the country in question because the cost of living is lower, and viceversa. v The PPP for private consumption, expressed in national currency, reflects the exchange rate in comparison with the market exchange rate, which does not reflect the ratio of prices. v Equalised PPP nominal wage rate is the hourly U.S. dollar nominal rate required to equally compensate a worker in a country, in purchasing power terms, for equal work rendered, as the equivalent U.S. worker is compensated. This analysis assumes the U.S. wage to be a living-wage. A living wage is a human right in accordance with Article 23 of the UN Universal Declaration of Human Rights. ILO's Convention 100 of "equal pay for equal work", for men and women is hereby applied in a global context. v Actual PPP Real wage rate is the hourly wage paid in a given country in purchasing power terms. v Actual Nominal wage rate is the nominal hourly wage paid in a given country. v Compensation deficit expresses the wage gap between the hourly nominal wage rate paid (4) and the equalised PPP hourly rate that should be paid for equal work (2). v Compensation equalisation index expresses the ratio of actual nominal pay to equalised PPP hourly pay (4 between 2): or the ratio of actual real pay (3) to the hourly nominal pay benchmark (1) (3 between 1). v Note: Variations in previous years are due to revisions made by the sources, including the World Bank's new 2011 PPP benchmarks, which replaced the previous 2005 benchmarks. v Since 2010 the international comparison of hourly compensation costs (hourly wage rates) between the U.S. and selected developed and "emerging" markets refers to all employed in the manufacturing sector and no longer will be available for production workers only. Production-line wage rates are on average 20% below wage rates for all employed in manufacturing, including production workers, for the 1996-2009 period, for all countries included in the assessment. For further reference see wage-gap assessment of trends and differences between production-line and all employed in manufacturing in compensation cost terms here:
Sources: The Jus Semper Global Alliance analysis is performed using the sources below. (Sources with X indicate that some of their data is directly incorporated in the table:) – Database of World Bank's World Development Indicators, 1975-2015. X U.S. Bureau of Labor Statistics, August 2013 and The Conference Board, International Labor Comparisons program, May 2016. – Purchasing Power Parities and Real Expenditures of World Economies. Summary of Results and Findings of the 2011 International Comparison Program. World Bank 2014. – Purchasing Power parities – Measurement and Uses by Paul Schreyer and Francette Koechlin, OECD Statistical briefs, March 2002.
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Note regarding the new 2011 PPC round: The International Comparison Program (ICP) released new data showing that the world economy produced goods and services worth over $90 trillion in 2011, and that almost half of the world’s total output came from low and middle income countries. Under the authority of the United Nations Statistical Commission, the 2011 round of ICP covered 199 economies - the most extensive effort to measure Purchasing Power Parities (PPPs) across countries ever. ICP 2011 estimates benefited from a number of methodological improvements over past efforts to calculate PPPs. The ICP’s principal outputs are PPPs for 2011 and estimates of PPP-based gross domestic product (GDP) and its major components in aggregate and per capita terms. When converting national economic measures (e.g. GDP), into a common currency, PPPs are a more direct measure of what money can buy than exchange rates. Limitations in the use of the data PPPs are statistical estimates. Like all statistics they are subject to sampling errors, measurement errors, and errors of classification. Therefore, they should be treated as approximations to true values. Because of the complexity of the process used to collect the data and calculate the PPPs, it is not possible to directly estimate their margins of error. Therefore, small differences in the estimated values between economies should not be considered significant.
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