Wage Gap Charts – Wage rates for all employed in manufacturing

The Jus Semper Global Alliance Living Wages North and South

Wage Gap Charts Wage rates for all employed in manufacturing

Wage gap charts for Group of Seven (G7) large economies and other selected economies, including "emerging" economies with available wage and PPP data (1996-2011) (first report for to be published for all employed in manufacturing – see definitions and sources at the end)

Wage gap charts for Group of Seven (G7) large economies and other selected economies, including "emerging" economies with available wage and PPP data (1996-2011).

Š 2013. The Jus Semper Global Alliance Web portal: www.jussemper.org/ E-mail: informa@jussemper.org

Under Creative Commons Attribution 3.0 License http://creativecommons.org/licenses/by/3.0 January 2013

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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 2011

8

•

2011 real wage gap with U.S. wages rates using PPPs

10

•

Size of gaps with U.S. – Manufacturing hourly real wage rates via PPPs

11

•

Equalisation index with U.S. – Manufacturing hourly real wage rates via PPPs

12

•

Gap Between Nominal Manufacturing Hourly Wage Rate and PPPs Equalisation to Real Wage Rate with U.S.

•

–

Mexico

13

–

Brazil

14

–

South Korea

15

–

Japan

16

–

United Kingdom

17

–

Spain

18

–

Canada

19

–

Singapore

20

–

Australia

21

–

Italy

22

–

France

23

–

Germany

24

–

Table T5 – All employed in manufacturing: Living-wage-gap and equalisation analysis in Purchasing Power Parities (PPPs) Comparison Terms 1996-2011

25

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.

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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 U.S. 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 U.S.; 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 U.S.; the cost of living is, thus, higher, § To calculate a living wage, the real wage of a specific category of U.S. workers is used as the benchmark, and the PPPs of a country in question are then applied to the U.S. 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 U.S. 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 U.S., 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.

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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) A Classic Example in 2011 § Equivalent manufacturing workers in Mexico and Brazil earn only 28% and 31%, respectively, of what they should be making in order to be compensated at par with their U.S. counterparts in terms of purchasing power, § U.S. Workers earn $35,53/hour whilst Mexican and Brazilian workers earn only $6,48/hour and $11,65/hour, respectively, § Since costs of living in PPP terms in Mexico and Brazil are 66¢ and $1,07, respectively, for each $1 U.S. dollar, equivalent Mexican and Brazilian manufacturing workers should be earning instead $23,42/hour and $38,18/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 small gap with its U.S. counterparts, since its nominal wage rate ($36,56) is 83% of the equivalent wage rate ($44,23) needed to be at par, with a PPP of $1,24 per each $1 U.S. dollar.

Nominal, Real and Equalisation Wage Rate for All Employed in Manufacturing by Using Purchase Power Parities (PPPs) Benchmark

2011

Nominal Hourly

PPP

PPP

Equalised Nominal Hourly

Equalisation

Wage Rate

2009

Real Wage Rate

Wage Rate

Index

United States

$ 35,53

100

$ 35,53

$ 35,53

100

Canada

$ 36,56 103% $ 6,48 18% $ 11,65 33%

124

$ 29,37 83% $ 9,83 28% $ 10,84 31%

$ 44,23 124% $ 23,42 66% $ 38,18 107%

83

Mexico Brazil

66 107

28 31

Sources: U.S. Department of Labour, Bureau of Labor Statistics, December 2012.

Data base of World Bank's World Development Indicators, 1975-2011, (GDP & GDP PPP, Atlas method) January 2013

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The Argument for Wage Equalisation Using Purchasing Power Parities (PPPs) § A Classic Example in 2011 § 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 $23,42 is what all-employed-in-manufacturing Mexicans should earn to be equally remunerated (in purchasing power terms) for performing an equivalent task. Yet, workers only earn $6,48 instead of $23,42; thus the employer deliberately retains $16,94, 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 72% of labour’s surplus value by only allocating to the worker 28% of what he/she is entitled to.

$ 35,53

$ 6,48

72% 28%

$ 16,94

$ 23,42

Nominal wage rate earned Equalised nominal wage rate Difference inappropriately retained by the employer U.S. equivalent wage rate (benchmark for equalisation)

Nominal wage rate earned Difference inappropriately retained by the employer Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance

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Wage rate gap comparisons for selected economies § 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: <http://www.jussemper.org/Resources/Labour%20Resources/Resources/ PLWvsAEM_wage_rates96-09.pdf> § Overall, seven out of the twelve countries in this assessment are better off in 2011 than in 1996, the first year available with hourly compensation cost data. Overall East Asian economies recorded the greatest gains in their wage-rate position. In contrast, Canada and Brazil have lost much ground whilst Australia, France and the UK have the same gap as in 1996. Most countries recorded their best position between ’02 and ’08. Canada, Brazil and France had their best equalisation index (Eq-Idx) in ‘96 or ’98. Mexico, as in the case of production-line wage rates, had negligible change in 15 years and continues to have the worst position of all countries. § In 2011, Germany shows a competitive advantage of its wage rates over the rates of equivalent workers in the U.S. Germany’s hourly wage rates have a purchasing power 20% stronger than the rates of their U.S. counterparts and is the only country in this assessment to have an advantage over the U.S. rate for all employed in the manufacturing sector. Based on Germany’s PPP cost of living, workers in the manufacturing sector needed a rate of $39,59, to be at par (equalised) with the U.S. rate. Yet, its current nominal rate is 20% higher ($47,38) than what is required. § In contrast, all other economies recorded at least a small gap. France, Italy, Australia, Singapore, Canada and Spain recorded gaps between 2% and 20%, whilst the U.K, Japan and South Korea recorded gaps between 20% and 30% of their respective equalisation level. Far behind these economies, Brazil and Mexico continue to have huge gaps with their U.S. counterparts of 69% and 72% respectively. § Brazil remains far behind its best Eq-Idx of ’96 in 2011. Mexico’s track record since 1996 is the worst in this assessment. Thus, barring the Philippines, Mexico continues to have the worst position of the 31 countries in the three regions of our assessments.

2011 gaps between nominal and equalised wage rates with U.S. wage rates using PPPs (Total hourly manufacturing compensation costs in U.S. dollars – U.S. is benchmark) $60 (20%)

15% 2% 7%

Benchmark

54,51

47,38 35,5335,53

17%

39,59

42,1243,03

46,29

25% 21%

20% 16%

47,56

44,23

36,1738,97

36,56 22,60

28,44

26,89

35,33

38,86 30,77

28%

38,18

35,71 26,33

69%

18,91 11,65

$0

U.S.

Germany

France

Italy

Australia

Singapore

Nominal Wage Rate

Canada

Spain

UK

Japan

South Korea

Brazil

23,42 72% 6,48

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 U.S. 2) If darker bar is greater than lighter bar= Nominal wage rate is less than wage rate required to be at par with U.S. 3) If both bars are in equilibrium= Nominal wage rate is equivalent to nominal wage rate in U.S. 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 U.S.. Comparisons are in terms of hourly compensation costs as explained in T5.) ______________________________________ Sources: – Data base of World Bank's World Development Indicators, 1975-2011, (GDP & GDP PPP, Atlas method) X International Comparisons of Hourly Compensation Costs for all employed in Manufacturing, December 2012.

U.S. Department of Labour, Bureau of Labour Statistics

January 2013

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§

East Asian countries, particularly Singapore and South Korea, experienced very strong reductions of their wage rate gaps between 1996 and 2011. Singapore and South Korea did it between ’96 and ’08. South Korea recorded its lowest wage rate gap in 2008 (28%) and managed to remain at the same level in 2011. Singapore recorded its lowest wage rate gap also in 2008 (13%) to then increase it drastically (24%), but it has managed to go back to a level close to that achieved in 2008 (16%). Japan has been gradually reducing its gap and it recorded its lowest gap ever in 2011 (25%).

§

The UK has been losing ground since its best position in ’06 and suffered a heavy increase of its gap in 2011. This has taken the UK back to the same wage rate gap of ’96 (21%). As with the UK, Canada has been losing ground since its pre-crises ’06 position. Moreover, in 2011 it recorded its worst wage rate gap ever (17%) and is now 10 points above its 1996 level and 13 points above its lowest gap recorded in ’98 (4%). Australia has also lost ground since 2004 and is now at the same level as in ’96 (15%).

§

Among the euro-area countries, Germany and Italy recorded small improvements in 2011 but Germany is still behind its best position of ’06 (-23%), while Italy retained its best position of ’08 (7%). Spain lost little ground in 2011 from its best position recorded in 2010 (20%). Yet, all three countries are clearly ahead of their 1996 gaps.

France, in contrast, has barely experienced any change since 1996.

§

Brazil remains far above its gap of ’96 (60%). Mexico’s track record continues to record gaps of 70% or more since 1996, with no meaningful improvement whatsoever.

Size of Gaps with U.S. - Manufacturing Real Hourly Wage Rates via PPPs

73

-15

1996

72

71

70

72

-12

-14

-14

-16

1998 U.S. Benchmark United Kingdom January 2013

2000 Canada Spain

South Korea Mexico

2002 Japan Brazil

2004 France Australia

Germany Singapore

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71

71

-23

-22

2006

2008

72

72

-18

-20

2010

2011

Italy Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance 11

§ From an equalisation perspective, East Asian countries experienced very strong gains in Eq-Idx between 1996 and 2011. Singapore and South Korea registered powerful growth of thier Eq-Idx between ’96 and ’08. South Korea recorded its best Eq-Idx in 2008 and managed to remain at the same level in 2011. Singapore recorded its best Eq-Idx in 2008 to then drop drastically, but it has recovered much of its best position since 2008. Moreover, both countries have the best performance of all countries for the entire 15-year period. Japan has been gradually reducing its gap and, after a slump in 2010, it recorded its best Eq-Idx ever in 2011. § The UK has been losing ground since its best Eq-Idx in ’06 and suffered a heavy drop in 2011 of four index points due to a lower nominal wage rate growth than in the U.S, with a much higher PPP increase. This has taken the UK back to the same Eq-Idx of ’96. As with the UK, Canada has been losing ground since its pre-crises ’06 Eq-Idx due to a lower nominal wage rate growth than in the U.S. with a higher PPPs increase. Moreover, in 2011 it recorded its worst Eq-Idx ever and is now 10 points below its 1996 level and 13 points below its best Eq-Idx recorded in ’98. Australia has also lost ground since 2004 and is now at the same level as in ’96. Its PPP has recorded the strongest growth of all countries, making it extremely expensive to increase real wages and quite difficult to close the living-wage gap. § Among the euro-area countries, Germany and Italy recorded small gains in 2011 but Germany is still behind its best Eq-Idx position of ’06, while Italy retained its best Eq-Idx of ’08. Spain lost little ground in 2011 from its best Eq-Idx recorded in 2010. Yet, all three countries are clearly ahead of its 1996 Eq-Idx, with Germany maintaining its clear advantage over U.S wage rates, with an Eq-Idx of 120. France, in contrast, has barely changed its Eq-Idx since 1996, remaining, except for 2004, almost at par with U.S. wage rates. Despite the crises, euro area countries have maintained or even improved, however slightly, their pre-crises equalisation position. § Brazil managed to record a one point gain in its Eq-Idx in 2011, which could be the result of the start of its minimum wage recovery in 2010, which sets out to increase real wages annually by adding to the consumer price index of the previous year the GDP growth of two years prior. The plan, enacted in a new law, sets out to increase real wages annually until 2023. We will see how the increase in real minimum wages exerts a multiplying effect on the wages of all employed in the manufacturing sector, but it should establish a positive trend.. Yet Brazil remains far behind its best Eq-Idx of ’96. Its main obstacle is that despite strong growth of nominal rates, its PPP is also growing rather strongly, making Brazil more expensive than the U.S. for the first time. § Mexico’s track record since 1996 exposes a deliberate State policy of maintaining real wages at the level of modern-slave-work wages, with a 28 Eq-Idx that is one point above its lowest index and two points below its best recorded index in fifteen years. Consequently, baring the Philippines, Mexico continues to have the worst position of the 31 countries in the three regions of our assessments.

Equalisation Index with the U.S. - Real Manufacturing Hourly Wage Rates via PPPs 123

115

114

112

122

116

114

120

118

27

28

29

30

28

29

29

28

28

1996

1998

2000

2002

2004

2006

2008

2010

2011

U.S Benchmark Brazil

Canada Australia

South Korea Singapore

Japan

France

Germany

Italy

United Kingdom

Spain

Mexico

Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance January 2013

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Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars)

30

23

15

Size of gap between nominal and equalised wage rates 8

0

1996

1998

2000

2002

2004

Mexico equalised wage rate

2006

2008

2010

2011

Mexico nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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13

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars) 40

30

20

Size of gap between nominal and equalised wage rates

10

0

1996

1998

2000

2002

2004

Brazil equalised wage rate

2006

2008

2010

2011

Brazil nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š 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 U.S. real wage rate (current dollars)

30

Size of gap between nominal and equalised wage rate 20

10

0

1996

1998

2000

2002

2004

South Korea equalised wage rate

2006

2008

2010

2011

South Korea nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š 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 U.S. real wage rate (current dollars) 50

Size of gap between nominal and equalised wage rate

38

25

13

0

1996

1998

2000

2002

2004

Japan equalised wage rate

2006

2008

2010

2011

Japan nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š 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 U.S. real wage rate (current dollars) 40 Size of gap between nominal and equalised wage rate

30

20

10

0

1996

1998

2000

2002

2004

United Kingdom equalised wage rate

2006

2008

2010

2011

United Kingdom nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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17

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars)

40

Size of gap between nominal and equalised wage rate

30

20

10

0

1996

1998

2000

2002

2004

Spain equalised wage rate

2006

2008

2010

2011

Spain nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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18

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars)

50

Size of gap between nominal and equalised wage rate

38

25

13

0

1996

1998

2000

2002

2004

Canada equalised wage rate

2006

2008

2010

2011

Canada nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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19

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars) 30

23

Size of gap between nominal and equalised wage rate

15

8

0

1996

1998

2000

2002

2004

Singapore equalised wage rate

2006

2008

2010

2011

Singapore nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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20

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars)

60

Size of gap between nominal & equalised wage rates

45

30

15

0

1996

1998

2000

2002

2004

Australia equalised wage rate

2006

2008

2010

2011

Australia nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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21

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars)

40 Size of gap between nominal and equalised wage rate

30

20

10

0

1996

1998

2000

2002

2004

Italy equalised wage rate

2006

2008

2010

2011

Italy nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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22

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars) 50

Size of gap between nominal and equalised wage rate

38

25

13

0

1996

1998

2000

2002

2004

France equalised wage rate

2006

2008

2010

2011

France nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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23

Gap between hourly nominal and equalised wage rates in PPP terms for all employed in manufacturing with equivalent U.S. real wage rate (current dollars) 50

Size of surplus between nominal and equalised wage rate

38

25

13

0

1996

1998

2000

2002

2004

Germany equalised wage rate

2006

2008

2010

2011

Germany nominal wage rate Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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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 1996-2011

Benchmark

1. U.S. Hourly Manufacturing Wage Rate*

1996

1998

2000

2002

2004

2006

2008

2010

2011

22,47

23,49

24,96

27,36

29,31

30,48

32,78

34,81

35,53

1,213 1,3638 0,89 19,99 20,93 18,62 1,37 0,93

1,188 1,4836 0,80 18,80 22,54 18,04 0,76 0,96

1,232 1,4855 0,83 20,70 22,46 18,63 2,07 0,90

1,230 1,5704 0,78 21,43 23,40 18,33 3,10 0,86

1,231 1,3017 0,95 27,73 25,41 24,04 3,69 0,87

1,207 1,1340 1,06 32,46 27,28 29,05 3,41 0,90

1,233 1,0660 1,16 37,92 28,11 32,52 5,40 0,86

1,219 1,030 1,18 41,19 29,24 34,60 6,59 0,84

1,231 0,989 1,24 44,23 29,37 36,56 7,67 0,83

(Hourly compensation costs)

Canada

Brazil

January 2013

PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1)

$ $ $ $ $

$ $ $ $ $

0,799 1,0051 0,80 17,86 8,94 7,11 10,75 0,40

$ $ $ $ $

$ $ $ $ $

0,867 1,1605 0,75 17,56 9,03 6,75 10,81 0,38

$ $ $ $ $

$ $ $ $ $

0,964 1,830 0,53 13,15 8,26 4,35 8,80 0,33

$ $ $ $ $

$ $ $ $ $

The Jus Semper Global Alliance (WGC 96/11)

1,114 2,9213 0,38 10,43 8,08 3,08 7,35 0,30

$ $ $ $ $

$ $ $ $ $

1,308 2,9262 0,45 13,10 8,55 3,82 9,28 0,29

$ $ $ $ $

$ $ $ $ $

1,394 2,1738 0,64 19,54 9,34 5,99 13,55 0,31

$ $ $ $ $

$ $ $ $ $

1,520 1,8326 0,83 27,18 10,18 8,44 18,74 0,31

$ $ $ $ $

$ $ $ $ $

1,727 1,760 0,98 34,16 10,27 10,08 24,08 0,30

$ $ $ $ $

$ $ $ $ $

1,797 1,672 1,07 38,18 10,84 11,65 26,53 0,31

25

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 1996-2011

Benchmark

1. U.S. Hourly Manufacturing Wage Rate* (Hourly compensation costs)

Mexico

France

Germany

Italy

PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1)

United Kingdom PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1)

January 2013

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

1996

1998

2000

2002

2004

2006

2008

2010

2011

22,47

23,49

24,96

27,36

29,31

30,48

32,78

34,81

35,53

3,764 7,60 0,50 11,13 6,16 3,05 8,08 0,27

4,974 9,15 0,54 12,77 6,57 3,57 9,20 0,28

6,101 9,5 0,65 16,10 7,29 4,70 11,40 0,29

6,558 9,7 0,68 18,57 8,24 5,59 12,98 0,30

7,220 11,29 0,64 18,74 8,23 5,26 13,48 0,28

7,191 10,91 0,66 20,10 8,92 5,88 14,22 0,29

7,478 11,14 0,67 22,00 9,64 6,47 15,53 0,29

7,906 12,624 0,63 21,80 9,80 6,14 15,66 0,28

8,191 12,427 0,66 23,42 9,83 6,48 16,94 0,28

6,483 5,1158 1,27 28,47 21,95 27,82 0,65 0,98 1,942 1,5049 1,29 28,99 25,75 33,22 (4,23) 1,15 1621,441 1542,76 1,05 23,62 19,98 21,00 2,62 0,89 0,641 0,6407 1,00 22,48 17,77 17,78 4,70 0,79

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

6,341 5,8995 1,07 25,25 23,23 24,97 0,28 0,99 1,932 1,7597 1,10 25,78 26,35 28,92 (3,14) 1,12 1565,076 1736,85 0,90 21,17 21,31 19,20 1,97 0,91 0,644 0,6034 1,07 25,09 19,36 20,68 4,41 0,82

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,937 1,0832 0,87 21,59 24,70 21,37 0,22 0,99 0,965 1,0832 0,89 22,23 28,53 25,41 (3,18) 1,14 0,815 1,083 0,75 18,79 22,11 16,64 2,15 0,89 0,635 0,6598 0,96 24,02 21,48 20,67 3,35 0,86

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

The Jus Semper Global Alliance (WGC 96/11)

0,901 1,0578 0,85 23,30 27,16 23,13 0,17 0,99 0,938 1,0578 0,89 24,25 31,17 27,63 (3,38) 1,14 0,842 1,0578 0,80 21,77 23,39 18,61 3,16 0,85 0,626 0,666 0,94 25,74 23,49 22,10 3,64 0,86

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,938 0,8040 1,17 34,21 27,54 32,14 2,07 0,94 0,895 0,8040 1,11 32,63 33,88 37,72 (5,09) 1,16 0,871 0,804 1,08 31,76 25,02 27,11 4,65 0,85 0,632 0,5456 1,16 33,94 24,61 28,50 5,44 0,84

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,901 0,7960 1,13 34,51 29,89 33,85 0,66 0,98 0,836 0,7960 1,05 32,02 37,48 39,37 (7,35) 1,23 0,832 0,796 1,05 31,86 27,28 28,52 3,34 0,90 0,625 0,5425 1,15 35,14 27,09 31,23 3,91 0,89

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,878 0,6791 1,29 42,39 32,29 41,76 0,63 0,99 0,807 0,6791 1,19 38,97 39,98 47,53 (8,56) 1,22 0,785 0,6791 1,16 37,88 30,39 35,11 2,77 0,93 0,645 0,5392 1,20 39,22 28,58 34,20 5,02 0,87

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,866 0,7541 1,15 39,96 34,08 39,12 0,84 0,98 0,803 0,7541 1,07 37,07 41,15 43,83 (6,76) 1,18 0,798 0,7541 1,06 36,86 31,72 33,59 3,27 0,91 0,656 0,6472 1,01 35,28 28,72 29,11 6,17 0,83

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

0,869 0,7178 1,21 43,03 34,78 42,12 0,91 0,98 0,800 0,7178 1,11 39,59 42,52 47,38 (7,79) 1,20 0,787 0,7178 1,10 38,97 32,98 36,17 2,80 0,93 0,682 0,6233 1,09 38,86 28,13 30,77 8,09 0,79

26

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 1996-2011

Benchmark

1. U.S. Hourly Manufacturing Wage Rate*

Spain

PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1)

Japan

South Korea

Singapore

Australia

January 2013

1996

1998

2000

2002

2004

2006

2008

2010

2011

22,47

23,49

24,96

27,36

29,31

30,48

32,78

34,81

35,53

119,447 126,68 0,94 21,19 16,42 15,48 5,71 0,73

119,588 149,41 0,80 18,80 17,68 14,15 4,65 0,75

0,732 1,0832 0,68 16,88 18,34 12,40 4,48 0,73

0,730 1,058 0,69 18,88 20,07 13,85 5,03 0,73

0,758 0,804 0,94 27,63 21,02 19,82 7,81 0,72

0,734 0,796 0,92 28,12 23,63 21,80 6,32 0,78

0,716 0,6791 1,05 34,58 26,31 27,75 6,83 0,80

0,710 0,7541 0,94 32,76 28,33 26,66 6,10 0,81

0,714 0,7178 0,99 35,33 28,60 28,44 6,89 0,80

(Hourly compensation costs)

PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1) PPP conversion factor, GDP (in country currency) Exchange rate PPP conversion factor, GDP (in U.S. dollars) 2. Equalised PPP nominal wage rate US $ 3. Actual PPP Real wage rate US $ 4. Actual Nominal wage rate US $ Compensation Deficit in US $ (2 minus 4) Wage Equalisation index (4÷2 or 3÷1)

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

170,600 108,78 1,57 35,24 15,09 23,67 11,57 0,67 731,420 805,00 0,91 20,42 10,50 9,54 10,88 0,47 1,293 1,410 0,92 20,60 13,01 11,93 8,67 0,58 1,276 1,2775 1,00 22,44 19,19 19,17 3,27 0,85

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

166,684 130,99 1,27 29,89 16,18 20,59 9,30 0,69 773,443 1400,40 0,55 12,97 11,99 6,62 6,35 0,51 1,414 1,672 0,85 19,87 13,56 11,47 8,40 0,58 1,401 1,5896 0,88 20,71 19,45 17,15 3,56 0,83

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

154,807 107,80 1,44 35,84 17,42 25,02 10,82 0,70 746,166 1130,90 0,66 16,47 14,58 9,62 6,85 0,58 1,217 1,725 0,71 17,60 16,60 11,71 5,89 0,67 1,421 1,7197 0,83 20,62 19,91 16,45 4,17 0,80

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

The Jus Semper Global Alliance (WGC 96/11)

143,578 125,22 1,15 31,37 18,73 21,48 9,89 0,68 769,318 1250,31 0,62 16,83 16,66 10,25 6,58 0,61 1,114 1,791 0,62 17,02 19,51 12,14 4,88 0,71 1,286 1,84 0,70 19,13 24,91 17,42 1,71 0,91

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

134,356 108,15 1,24 36,41 20,34 25,27 11,14 0,69 795,939 1145,24 0,70 20,37 18,17 12,63 7,74 0,62 1,059 1,690 0,63 18,37 21,07 13,20 5,17 0,72 1,317 1,3578 0,97 28,42 27,59 26,75 1,67 0,94

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

124,733 116,31 1,07 32,69 22,41 24,03 8,66 0,74 774,431 954,32 0,81 24,73 21,40 17,37 7,36 0,70 1,017 1,588 0,64 19,51 21,51 13,77 5,74 0,71 1,399 1,3271 1,05 32,13 27,67 29,17 2,96 0,91

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

116,883 103,39 1,13 37,06 24,31 27,48 9,58 0,74 783,377 1098,71 0,71 23,37 23,63 16,85 6,52 0,72 0,932 1,414 0,66 21,61 28,63 18,87 2,74 0,87 1,551 1,1714 1,32 43,41 27,12 35,91 7,50 0,83

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

111,360 87,78 1,27 44,16 25,03 31,75 12,41 0,72 824,389 1155,739 0,71 24,83 24,86 17,73 7,10 0,71 0,988 1,363 0,73 25,24 26,34 19,10 6,14 0,76 1,465 1,087 1,35 46,91 29,44 39,67 7,24 0,85

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

106,674 79,70 1,34 47,56 26,68 35,71 11,85 0,75 820,464 1106,94 0,74 26,33 25,51 18,91 7,42 0,72 0,951 1,257 0,76 26,89 29,86 22,60 4,29 0,84 1,485 0,9679 1,53 54,51 30,17 46,29 8,22 0,85

27

*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, GDP (Gross National Income) 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, GDP 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 GDP PPP, 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 2005 PPP benchmarks, which replaced the previous 1993 benchmarks. v According to the World Bank, the 2005 PPPs are the most comprehensive for developing countries since 1993, and reveal that the size of their economies were often overestimated.

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, 1975-2011, (GDP & GDP PPP) X Hourly Compensation Costs for all employed in Manufacturing, updated on December 2012. U.S. Dept. of Labour, Bureau of Labour Statistics.

– Global Purchasing Power Parities and Real Expenditures. 2005 International Comparison Program. World Bank 2008.

– Purchasing Power parities – Measurement and Uses by Paul Schreyer and Francette Koechlin, OECD Statistical briefs, March 2002.

January 2013

The Jus Semper Global Alliance (WGC 96/11)

28

Note regarding the new 2005 PPC round: Since 1970 the International Comparison Program (ICP) of the World Bank has conducted eight rounds of PPP estimates for the major components of countries’ gross domestic product (GDP)—the most recent for 2005. According to the World Bank, the PPP process calls for the systematic collection of price data on hundreds of representative and carefully defined products and services consumed in each country. Purchasing power parities are needed because similar goods and services have widely varying prices across countries when converted to a common currency using market exchange rates.

The PPPs previously published in World Development Indicators and used to estimate international poverty rates were extrapolated from the benchmark results of the 1993 ICP or from the Eurostat 2002 and then extrapolated forward and backward. The extrapolation method assumes that an economy’s PPP conversion factor adjusts according to the different rates of inflation for its economy and the base economy, the United States. A good approximation in the short run, but over a longer period changes in the relative prices of goods and services and in the structure of economies—what they produce and consume—distort this relationship, and new measurements must be made. New methods of data collection, differences in country participation, and changes in analytical methods all add to the differences between new PPPs and old.

The major finding, in the 2005 round of PPP estimates, is that, under the new PPPs, the aggregate GDP of developing economies in 2005 is 21 percent smaller than previously estimated, corresponding to a 7 percentage point reduction in their share of world GDP—from 47 percent to 40 percent. The United States—as the base country, unaffected by any revision—increased its share from 20,6 percent to 22,1 percent.

Note regarding change in methodology in Mexico’s primary source: Beginning in 2009, the U.S. Bureau of Labour Statistics (our source for hourly compensation costs), reviewed its primary data source.

Compensation cost estimates for Mexico are thus significantly higher. Previously, estimates were benchmarked to the Mexican Economic Census, which occurs every 5 years (most recently in 2008). This census is exhaustive in regards to its firm coverage by size, so it captures the compensation costs incurred by all firms, including very small firms and microenterprises. The survey which our estimates are currently based on, the Monthly Industrial Survey (MIS), is directed towards relatively larger establishments. It samples establishments with more than 15 employees and exhaustively includes establishments with more than 300 employees. Because larger firms typically compensate employees at higher rates, the MIS-based hourly compensation estimates will necessarily be higher than the Census-based estimates.

The Jus Semper Global Alliance January 2013

29 The Jus Semper Global Alliance (WGC 96/11)