MEXICO’S WAGE GAP

THE POLITICAL AND SOCIAL DISASTER ENDURED BY MEXICO CLEARLY REFLECTS THE DEPLORABLE AND SHAMEFUL STATE OF MANUFACTURING WAGES IN MEXICO WHEN COMPARED WITH DEVELOPED AND SIMILAR ECONOMIES

The desertion of Mexico’s governments in the last three decades of the basic responsibilities of any government that praises itself for being democratic and, as its consequence, the explosion of a state of social disarray in the last few years are accurately exposed in the state of labour endowments of production-line workers in the manufacturing sector. Since 1980 PPP manufacturing real wages –relative to their purchasing power equalisation with U.S. wages– begin a consistent erosion, dropping 51% between 1980 and 2006, for employers adjust their prices –but not wages proportionally– supported by the full endorsement of the State through its customary policy of wage pauperisation.

With the adjustment of the new World Bank’s PPP estimates round already incorporated, which reduces Mexico’s cost of living from PPP 73 to PPP 65 in 2005 and keeps the same level in 2006, real wage erosion is so dramatic that the assessment does not cease to be deplorable. Mexico reaches its least precarious equalisation level in 1980 when manufacturing wages reach a 35% equalisation, with a cost of living of 66% of the U.S. Twenty six years later the cost of living (price levels) is 65% of the U.S. (a relation of 65¢ against $1 in the U.S.). That is, with virtually the same cost of living that in 1980 (98,4% of 1980) relative to the U.S. cost, Mexican workers receive less than half what they received in 1980 in PPP terms (17 versus 35). In order to be compensated equitably vis-à-vis their U.S. counterparts, Mexican workers should receive a wage of $15,80/hour instead of the miserable $2,75/hour. In this way, the wage gap between what should be and what is, translates into the 83% gap that has been resilient since 1995 (charts in pages 14-17).

The future of manufacturing wages in Mexico is expected to get only worse for the remainder of the current government. In 2008 the increase to the federal minimum wage –benchmark for wages in all sectors– was 4%, under the argument of a 2007 inflation rate of only 3,76%, which is not credible given that the World Bank reported increases of 36,7% in food and 48% in energy sources. The cost of the basic basket of 42 food staples increased by 35% in 2007 (Di Constanzo: 13/1/08). This exposes a clear manipulation of data by the Mexican government and a policy of wage pauperisation. Twelve months later the minimum wage increase has been set at 4,6% for 2009 despite the official inflation rate of 6,23% (Bank of Mexico on 29/12/08), still greatly underestimated. In other words, the government is openly maintaining its policy of real wage erosion for Mexican workers by setting an increase below the official inflation rate.

Download the pdf file with the analysis of Mexico’s wage gap here.