Mexico's Wage Gap Charts – Wage rates for all employed in manufacturing 

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 (1996-2011) (first report for to be published for all employed in manufacturing – see definitions and sources at the end)

Wage gap charts for Mexico vis-à-vis selected developed and “emerging” economies, with available wage and PPP data (1996-2011).

© 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 February 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 wage rate gap comparisons for selected economies

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

•

Political context of the state of manufacturing wages in Mexico

13

•

Main features of the state of manufacturing wages in Mexico

15

•

Gap between manufacturing hourly wage and PPP equalisation index with real U.S. wage

17

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Comparison of nominal hourly wage rates of Mexico’s manufacturing workers to close or maintain 1996 gap with U.S. counterparts

18

•

Gap Between nominal manufacturing hourly wage rates and equalised wage in PPP terms with equivalent U.S. real wage rate

19

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Gap between equalisation index and size of manufacturing hourly real wage rate gap in Mexico vis-à-vis U.S. real wage rate

20

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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent U.S. wage rate of Mexico and South Korea

21

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Mutual proportion comparisons of PPP real wage rate between Mexico and South Korea

22

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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent U.S. wage rates of Mexico and Argentina

23

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Mutual proportion comparisons of PPP real wage rates between Mexico and Argentina

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•

Behaviour of comparative indices of manufacturing hourly real wage rate with thirteen countries

25

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Performance of equalisation indices of manufacturing real wage rates and PPP indices with twelve countries

29

•

Thirty-year projection of the closing of real wage rate equalisation gap

35

•

Prospectus

37

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Table T5 – Living-Wage-Gap and Equalisation analysis (vis-à-vis the U.S.) for all employed in manufacturing in purchasing

38

power parity terms 1996-2011 •

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) February 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

February 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 February 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 February 2013

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Political context of the state of manufacturing wage rates in Mexico

The Mexican State, which has been permanently challenged for the lack of legitimacy of its elections in 2006 and 2012, corroborates every year its vocation as a customary violator of the labour rights of its citizens §

The premeditated and carefully designed State policy of all governments in power since the 1980s –which deliberately pauperises the Mexican labour force– leaves no alternative but to continue exhibiting the nefarious consequences of such policy on the real wages of workers and the huge wage gaps with equivalent workers in the U.S. and, barring the Philippines, in all 31 countries included in our assessments. Moreover, it is necessary to depict once again the political context in which this planned pauperisation is imposed.

Assessing the wage data of Mexico’s manufacturing sector since 1975, irremediably exhibits the exploitative and repressive character of the group that has wielded real power for more than three decades. A group that has completely submitted itself to international financial capitalism and the interest of its corporations, by working as its market agent in exchange for the benefits of 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 mafia-like nature that accurately delineates 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, public policy maintains real wages at their lowest level –when not at even more precarious levels– by blocking any increase above inflation, despite the fact that real wages for manufacturing workers have been pulverised consistently since 1980. Indeed, the CPI for the entire economy is only a fraction of that for the basic goods consumed by working families. This trend is extremely consistent with the new data, which now reports on the wages of all employed in manufacturing since 1996, as previously explained. The 2011 equalisation index in particular (28) is only one point above its lowest index and two points below its best recorded index in fifteen years. Thus, it has basically not moved, unlike the case of 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.

§

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. The ILO’s core conventions, ratified decades ago by the Mexican State, are violated customarily. Miners and electrical workers have endured one of the most systematic repressions.

§

The most paradigmatic case of the State’s labour policies is recorded in 2009, when it made redundant –through an armed attack at midnight and the launching of a misinformation and libel campaign– 44.000 jobs of the Mexican Electrical Worker’s Union, from the State company Luz y Fuerza del Centro. The pretext: low productivity and high wages. The truth: the privatisation of its fibre optic network of one thousand kilometres for its subsequent operation by private companies to market phone, internet and video services.

§

The State’s violation of labour rights has generated unusual condemnation internationally. The International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), with more than 20 million members worldwide, announced the launching of a campaign in 134 countries, and before representatives of the U.S. and Canadian governments, condemning the “anti-workers policies” of the Mexican State. The ICEM equates the policies of labour repression in Mexico to those prevalent in Myanmar and Zimbabwe, two countries that stand out among the most repressive and as being the biggest violators of labour rights worldwide (La Jornada, 9 Jan 2010).

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Political context of the state of manufacturing wage rates in Mexico

§

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 (7,75%), 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 -7,1% of GDP in 2009), the State proudly brags about record foreign reserves of more than U.S. $141,2 billion (2011), resulting, in a substantial portion, from foreign investments in variable income instruments.

§

In this way, the country has suffered a terrible transformation in the components of job generation, for it is estimated that –at least since 2005– more than 50% of the EAP works in the informal sector according to the government’s own data (Naciones Unidas y Gabinete de Desarrollo Humano y Social del gobierno de México, Resumen Ejecutivo. Los Objetivos de Desarrollo del Milenio en México: Informe de Avance 2005) and to the OECD, which estimates that up to 63% of total employment is informal (Employment Outlook 2011 – How does Mexico compare? OECD, 2011).

Therefore, 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 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 for 2013 amounts to $4,98 (P 64,76) for an 8 hour shift. Clearly, Mexico’s minimum wages are of a labour-bondage 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 the “indispensable basket of goods”. This basket (or CBI by its Spanish-language acronym) is a standard developed to measure the purchasing power of wages, to acquire 40 basic goods, as a reliable indicator to assess poverty. The CBI is considered the bare minimum necessary for the reproduction of the workforce. Typically, this assessment is performed against Mexico’s minimum wage. In this way, in 2011 the minimum wage was able to afford 11,9% of the CBI, down from 49% in 1994, a 77% loss of purchasing power in 17 years (1) STPS: Salarios Mínimos Vigentes 1994 & 2011; 2) Laura Juárez Sánchez: Polítíca 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, $23,09 in 2009 and $39,91 in 2011. By the same token, our own calculations show that the hourly direct pay (not counting social or company indirect benefits) of production-line manufacturing workers in Mexico could afford 1,3 CBIs in 1994, but only 69% of it in 2009, a 47% loss of purchasing power in 15 years. As for all employed in manufacturing –whose direct pay was little more than 41% higher than that for production workers in 2009, while they were able to afford 98% of the CBI in 2009, they could only afford 65% in 2011. Evidently, while consumer price indices for the entire economy were around 4% in 2010 and 2011, the CBI inflation averaged 36,4% annually for the same period. Clearly, the wages for all workers including all employed in manufacturing have been pauperised and permanently converted into hunger wages.

§

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-of-law 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 has officially engendered –as of December 2012– more than 60.000 fatalities (since 2007).

§

A deliberate predatory and plundering economic policy. It must be clear that the dire results rendered in labour’s share of income are not due to a failure in economic management but to a deliberate economic policy of plundering. This enables the Mafia State to keep a great part of Mexican workers under modern-slave-work conditions. Thus, since 1981, when production 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 U.S. wage rates– dropping to half of its 1981 equalisation index by 2009. This is possible due to the full support of the State through its customary policy of pauperisation, to which it adds its new policy of social intimidation, for it is 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. 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. In fact, many alternative and reliable sources estimate that the 60.000 casualties officially recognised at the end of 2012, were actually above 100.000. The recently inaugurated President Peña Nieto, arrives with a similar track record of human rights violation, repression, corruption and impunity that have characterised Mexican administrations for most of their history.

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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 reach 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 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, 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 U.S. counterparts. Subsequently, PL wage rates recover 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 the 23 of 2009, Mexican production-line wage rates have lost 49% of their already meagre purchasing power equalisation with the wage rates of their U.S. counterparts.

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 using 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 U.S. 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. 30). The contrast was even more dramatic before the crises, for in 2007 the relationship was of 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 3.6 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 59% of South Korea’s, but by 2011 they were down to only 38% (page 22). 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 exclusively competitive economic sectors, which had become competitive in global markets. (Alice H. Amsden: Asia’s Next Giant: South Korea and Late Industrialisation, Oxford University Press, 1989).

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Main features of the state of manufacturing wage rate in Mexico

§

Comparison with Argentina. Argentina 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 U.S. was not much higher than Mexico’s (35 vs. 27). During its deep economic crises of 2002, Argentina’s equalisation index was barely better than Mexico’s (32 vs. 30). Yet by 2011, Argentina’s real wage rates were 2,6 times those of Mexico, whilst Mexico’s were barely 38% of Argentina’s (page 24). Since 2002, when Argentina’s equalisation index was at its lowest point (32) and its PPP real wage rates were barely 7% 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 2011) reported by INDEC, the official statistics bureau responsible for this measurement.

While INDEC reported a 9,5% inflation rate for 2011, most estimates more than double it. The “Billion Prices Project” from MIT reckons real inflation to be at 23,99%, which is still less than the 31,3% nominal rate increase of the manufacturing wage rate recorded. This makes the PPP reported by the World Bank an understatement of the true cost of living, which, if estimates are correct, should be at around $0,84 instead of $0,62 in 2011. That would make the wage equalisation index a 53 instead of 72, only a slight change from the 51 since 2008. The controversy notwithstanding, Argentina’s wage rates in the manufacturing sector did increase in real terms in 2011 for they increased more than 7 points above unofficial inflation estimates (31,3% versus 24%), but in terms of Eq-Idx they only showed a small gain. In this way, Argentina’s manufacturing hourly wage rate has improved dramatically its equalisation with the equivalent rate in the U.S, since 1996, for it has increased 51% (from 35 to 53) using unofficial inflation estimates and by 106% (from 35 to 72), if we use official inflation estimates. Since 1996 Argentina’s nominal manufacturing wage rates in domestic currency increased annually an average of 16,2% and 24,4% since 2003. Argentina’s average inflation using official data is 7,1% between 1997 and 2011 and 10,8% if we use unofficial data. Thus, nominal wage rates in manufacturing increased annually, on average, more than double the average official inflation rate (16,2% vs. 7,1%) and 50% more than the average using unofficial inflation rates (between 2008 and 2011). In great contrast, Mexico’s nominal manufacturing wage rates in domestic currency increased annually an average of 8,8%, but inflation averaged annually 7,5% for the same period; thus, real wages barely improved. This is why Mexico’s wage rate equalisation with its U.S. counterparts has remained at the same level since 1996 whilst in countries like South Korea and Argentina it has increased dramatically, even when using the higher unofficial inflation rates in the latter case.

§

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 25), (Japan, South Korea and Canada: page 26), (Spain, Italy and France: page: 27), (Germany, United Kingdom and United States: page 28) 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, eight ended up with a higher real wage rate index in 2011 than in 1996 against Mexico’s real wage rate. Three sustained their advantage and only Brazil and Canada had any meaningful loss in their real wage rate advantage. However, all thirteen countries recorded increases in their comparative advantage over Mexico’s manufacturing real wage rates after 2002. This is due to the clear pegging of Mexico’s nominal wage rate increases to the inflation rate. Indeed, between 2003 and 2011, Mexico’s nominal wage rate in local currency increased annually an average of 4,55% whereas the inflation rate grew by an average of 4,31%. Conversely, the wage rate increased an annual average of 15,26% in local currency between 1997 and 2002, whilst the inflation rate grew by 12,34%.

§

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 2011– increased from 332 to 361. Consequently, Mexico’s deliberate policy of real wage containment guarantees that its living wage rate equalisation gap with the the U.S., 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 U.S. decides to increase real wage rates however little (page 28).

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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. Thus, while the real to nominal wage ratio was 2 to 1 in 1996, by 2011 it had dropped to 1,5. Concurrently, equalised wage rates continue to increase as nominal U.S. wage rates sustain their annual growth. As for the wage rate gap with equivalent U.S. 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 U.S. wage rate and Mexico’s real wage rate has remained almost exactly the same for the entire period (1996: 3,65 to 1 vs. 2011: 3,61 to 1).

Gap between manufacturing hourly wage rate and PPP equalisation index with real U.S. wage rate 40

35,53

34,81 32,78

30 27

30

29

28

27,36

29,31

28

30,48

29

29

28

28

Current U.S. dollars

24,96 23,29

22,47

23,42 22,00

21,80

20,10 18,74

18,57

20 16,10 12,77 11,13 10

6,16

0

6,57

3,05

3,57

1996

1998

7,29

4,70

2000

Equalisation Index Mexico Equalised Nominal Wage Rate Mexico Real Wage Rate February 2013

8,24

8,23

8,92

9,64

9,83

9,80

5,59

5,26

5,88

6,47

6,14

6,48

2002

2004

2006

2008

2010

2011

US Benchmark Mexico Nominal Wage Rate The Jus Semper Global Alliance (WGMex 96/11)

Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance 17

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 $11,13 to be at par with the U.S. wage rate of $22,47. Since the U.S. wage rate has climbed to the level of $35,53 in 2011, Mexico’s equalised PPP nominal rate needed to climb to $23,42. 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 $6,42, or an increase of 110%. The actual increase of the nominal wage rate by 2011 was of $6,48, equivalent to a 112% growth –a negligible difference. This of course does not illustrate that, prior to the 15 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 U.S. counterparts and actual results (U.S.dollars) $ 22,47 U.S. Wage rate $ 35,53

100%

$ 11,13 Mexico’s rate equalised to close the gap

100%

$ 23,42

27,4%

$ 3,05 Mexico’s rate to maintain the same gap

27,4%

$ 6,42

27,4%

$ 3,05 Actual result of Mexico’s rate

27,67%

$ 6,48 $0

$13,33

1996

$26,67

$40,00

2011 Sources: WB, U.S. BLS, 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 U.S. real wage rates (current dollars) 30

23

15

Size of gap between nominal and equalised wage rate

8

0

1996

1998

2000

2002

2004

Mexico Equalised Wage

2006

2008

2010

2011

Mexico Nominal Wage

Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance February 2013

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Gap between equalisation index and size of manufacturing hourly real wage rate gap in Mexico vis-à-vis U.S. real wage rate 80%

73%

72%

71%

70%

28%

29%

30%

1998

2000

2002

72%

71%

71%

72%

72%

28%

29%

29%

28%

28%

2004

2006

2008

2010

2011

60%

40%

27%

20%

0% 1996

Size of Gap

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

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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent U.S. hourly wage rate of Mexico and South Korea for all employed in the manufacturing sector (1996-2011) 80

60

40

20

0

1996

1998

2000

2002

2004

South Korea

2006

2008

2010

2011

Mexico

Equalisation index comparison in PPP terms of hourly real wage rate with equivalent U.S. 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, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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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 1,70

1,82

2,00

2,02

2,21

2,40

2,45

2,54

2,59

2 0,59

0,55

0,50

0,49

0,45

0,42

0,41

0,39

0,38

1996

1998

2000

2002

2004

2006

2008

2010

2011

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 Fuentes: BM, OEL de EEUU, OCDE – © La Alianza Global Jus Semper

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Equalisation index comparison in PPP terms of hourly real wage rate with equivalent U.S. wage rate of Mexico and Argentina (number of times using official and unofficial inflation rates for Argentina)

80

60

40

20

0

1996

1998

2000 Argentina

2002

2004 Mexico

2006

2008

2010

2011

Argentina (unofficial) Sources: WB, U.S. BLS, OECD â&#x20AC;&#x201C; Š The Jus Semper Global Alliance

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Mutual proportion comparison of PPP real wage rates between Mexico and Argentina (number of times using official and unofficial inflation rates for Argentina)

3

2,61 2,28 2

1,82 1,63 21,30

1,38

1,33

1,33 1,07

0,94

1

0,77

0

1996

0,72

1998

0,75

2000 Mexico

0,75

2002 Argentina

2004 Argentina unofficial

0,61

2006

0,55 2008

0,44 2010

0,38 2011

Mexico (Argentina unofficial)

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

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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) 335

312

302

296

1998

307

300

2000

2002

2004

2006

2008

2010

2011

211

206

1996

1998

241

237

228

2000

2002

2004

2006

2008

2010

2011

Singapore

Australia

137

269

256

281

273

1996 146

304

297 310

261 113 98

104

105

106

105

228

110 182 163 130

138 138

130

133

133

133

107

163

183

173

193

133

107 *1996 Brazil data has been compared with 1995 Mexico data.

1996

1998

2000

2002

2004

2006

2008

2010

2011

1996

1998

2000

2002

Argentina

Brazil

2004

2006

2008

2010

2011

Argentina (unofficial)

Sources: WB, U.S. BLS, 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) 271

260

255 251 245

240

252

260

221

247

246

254

239

170

200

202

2000

2002

182

227

1996 346

1998

2000

2002

2004

2006

2008

2010

2011

Japan 343 308

284

309

306

292

298

299

1996

1998

2004

2006

2008

2010

2011

South Korea

1996

1998

2000

2002

2004

2006

2008

2010

2011

Canada

February 2013

Sources: WB, U.S. BLS, 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) 289

291

396 376 273 267

269

324

324 303

265

304

306

2004

2006

315

284

255 252 244

1996

1998

2000

2002

2004

2006

2008

2010

2011

Spain 356

354

354 348

1996

1998

2000

2002

2008

2010

2011

Italy

339 335

335

335

2004

2006

2008

330

1996

1998

2000

2002

2010

2011

France

February 2013

Sources: WB, U.S. BLS, 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) 433

420

418

420 415

412

373

376 339

401

288

295

295

1996

1998

200

285

299

304

2004

2006

391

378

1996

1998

2000

2002

2004

2006

2008

2010

2011

Germany 365 361 358

356

355

2002

2008

2010

2011

United Kingdom 342

342

340

332 1996

1998

2000

2002

2004

2006

2008

2010

2011

United States

February 2013

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

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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 U.S. counterparts and behaviour of Mexico’s purchasing power parity indices. In the following chart (page 30) 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 27 and the PPP 50, by 2002 the PPP had climbed 36% to its highest position (68) but the Eq-Idx increased barely 11% to its highest point (30). Thus PPP cost of living increased by more than a third but the Eq-Idx barely improved. Then, both indicators levelled off at a miserable plateau (at its nadir) between 2002 and 2011. Needless to say, the PPP is based on surveys of the consumer price index to assess inflation, but, as this report has shown, the cost of the 40 items of the CBI (indispensable basket of goods) increased 336% between 1994 and 2011, becoming unaffordable for the vast majority of workers including those employed in manufacturing (page 14). In this way, the gap between the PPP cost of living and equalisation is now much wider than in 1996. § This does not hold true in the relationship between the same indicators for most countries. Irrespective of the size of the gaps, in most cases equalisation levels tend to increase and approach –or at least maintain the same ratio– with the PPP cost of living indices. In most cases the PPP cost of living and the Eq-Idx cross their path or at least meet one or more times. While in Mexico the lines of both indices experienced a widening gap for the 1996-2011 period, in most countries the gap narrowed. Only Australia, Brazil, Canada and the UK have a wider gap between cost of living and equalisation indices in 2011 than they did in 1996 (pages 31 to 34) and yet they met or crossed their path keeping a more logical relationship. When there are sharp increases in the PPP cost of living, the Eq-Idx tends to decrease, such as in Australia and Canada. But in many cases the Eq-Idx tends to stay at the same level, despite meaningful hikes in the PPP, or recovers rapidly after a temporary drop, such as in Singapore, South Korea, Argentina, Spain, Italy, France and Germany. Even in the case of Brazil, where the PPP cost of living more than doubled since 2005, the Eq-Idx has stayed at the same level instead of dropping. In Mexico’s case, in contrast, the Eq-Idx draws a flat line irrespective of the sharp increase of the PPP between 1996 and 2002. The two lines never cross their paths or at least meet. § These relationships and trends are not as dramatic in the case of all employed in manufacturing vis-à-vis productionline workers because the window of analysis is of only 16 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 equalisation indices of Mexico’s PPP manufacturing hourly real wage rate vis-à-vis U.S. counterparts and behaviour of Mexico’s purchasing power parity indices (cost of living in PPP terms – U.S.= 100) 68

70

65

64

66

67

66 63

54

53

50

35

28

29

30

27

1996

1998

2000

2002

28

29

29

28

28

2004

2006

2008

2010

2011

18

0

Mexico PPP Living Cost

Equalisation Index Sources: WB, U.S. BLS, 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 200 relative to their U.S. counterparts 167

133 100 100 83 67 67 33 50 1996

1998

2000

2002

2004

Mexico Equalisation Australia Equalisation

2006

2008

2010

2011

Mexico PPP cost of living Australia PPP cost of living

33

17

110 1996

92

1998

2000

2002

Mexico Equalisation Singapore Equalisation

73

2004

2006

2008

2010

2011

Mexico PPP cost of living Singapore PPP cost of living

55 37 18

1996

1998

2000

2002

Mexico Equalisation Brazil Equalisation

February 2013

2004

2006

2008

2010

2011 Sources: WB, U.S. BLS, OECD – © The Jus Semper Global Alliance

Mexico PPP cost of living Brazil PPP cost of living

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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 U.S. counterparts 200 167 133

100

100 83 67 67

33

50 1996

1998

2000

2002

Mexico Equalisation Japan Equalisation

2004

2006

2008

2010

2011

Mexico PPP cost of living Japan PPP cost of living

33

100

17

83 1996

67

1998

2000

2002

Mexico Equalisation South Korea Equalisation

50

2004

2006

2008

2010

2011

Mexico PPP cost of living South Korea PPP cost of living

33 17

1996

1998

2000

2002

Mexico Equalisation Argentina Equalisation

February 2013

2004

2006

2008

2010

2011

Mexico PPP cost of living Argentina PPP cost of living

The Jus Semper Global Alliance (WGMex 96/11)

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

32

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 U.S. counterparts

130 108 87

110

65

92

43

73

22

55 1996

1998

2000

2002

Mexico Equalisation Canada Equalisation

2004

2006

2008

2010

2011

Mexico PPP cost of living Canada PPP cost of living

37

18 120 100

1996

80

1998

2000

2002

Mexico Equalisation Spain Equalisation

60

2004

2006

2008

2010

2011

Mexico PPP cost of living Spain PPP cost of living

40 20

1996

1998

2000

2002

Mexico Equalisation Italy Equalisation

February 2013

2004

2006

2008

2010

2011

Mexico PPP cost of living Italy PPP cost of living

Sources: WB, U.S. BLS, 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 U.S. counterparts

120 100 80

150 60 125

40

100

20

75 1996

1998

2000

2002

2004

Mexico Equalisation United Kingdom Equalisation

2006

2008

2010

2011

Mexico PPP cost of living United Kingdom PPP cost of living

150

50 25

125 1996 100

1998

2000

2002

Mexico Equalisation France Equalisation

75

2004

2006

2008

2010

2011

México PPP cost of living France PPP cost of living

50 25

1996

1998

2000

2002

Mexico Equalisation Germany Equalisation

February 2013

2004

2006

2008

2010

2011

Mexico PPP cost of living Germany PPP cost of living

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

The Jus Semper Global Alliance (WGMex 96/11)

34

Thirty-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 U.S. in 2011 as the benchmark, the following chart (page 36) illustrates the average increase required to close the hourly real wage rate gap of these Mexican workers with their U.S. counterparts, in PPP and dollar terms, in the term of thirty years or less, starting in 2012. The projection is made assuming a context of stable global economic conditions. This would be reflected in relatively low inflation rates not just for Mexico and the U.S. but also for the entire world. This would assume a sustained growth of Mexico’s economy in line with the U.S. economy, averaging 3%, which is less than ideal for a middle-income country, due to its total dependency on the U.S. economy. This would place Mexico’s average growth below the average for Iberian America. Even though the assumed average inflation rate of 5% is slightly above that experienced between 2001 and 2011, 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 2,8% recorded since 1990, which we also consider relatively optimistic, for the reasons discussed above.

§

Criteria used in the projection: ➡ Average U.S. CPI (inflation): 3% (average of 2,47% between 2001 and 2011). ➡ Average Mexican CPI: 5% (average of 4,29% between 2001 and 2011). ➡ Real value of wages in the U.S. remains constant, increasing nominally by 3%, annually, to neutralise inflation. ➡ World Bank indicators recorded a PPP of $0,6591 for Mexico, equivalent to 65,9% of the U.S. cost of living in 2011. ➡ The benchmarks –and starting point– used in this projection are the PPP manufacturing hourly real wage rate (total compensation cost for both economies for 2011: U.S: $35,53 and Mexico: $9,83; and nominal wage rates: $35,53 and $6,48 respectively). ➡ Real wage rate figures are shown at constant prices, reflecting future purchasing power after adjusting for inflation. ➡ The exchange rate between the U.S. and Mexico is assumed to remain fairly stable at an average of P$13 per $1 U.S. (currently at P12,7 and a year ago at also P12,7 per $1 U.S. dollar). It does not have an effect on the PPP whatsoever. The PPPs are estimates derived from the relative price levels in different countries and reflect the rate at which currencies can be converted to purchase equivalent goods and services.

§

Results of the thirty-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 U.S. 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 U.S. and Mexico over a thirty-year period. ➡ Nominal wage rates in Mexico were increased an average of 10% annually until equalisation was achieved, assuming a 5% inflation rate. Results indicate that closing Mexico’s wage rate gap at a rate of 10% annually, under the above criteria, would allow manufacturing wage rates to achieve 100% equalisation in year 28 with an increase of 8,06% in that year. A nominal increase of 5% would be required thereafter to neutralise the assumed average inflation of 5% and to keep equalisation with U.S. wage rates under their assumed 3% nominal annual increase. ➡ Not shown in the chart, the projection made Mexico’s cost of living in PPP terms in year thirty (2041) equivalent to 112,2% of the U.S. cost of living – whereas it was 65,91% in 2011– due to the clearly higher inflation rate. ➡ Closing the wage rate gap would cover the 2012 to 2041 span of time.

February 2013

The Jus Semper Global Alliance (WGMex 96/11)

35

Thirty-year projection of Mexico's equalisation of hourly real wage rates of all employed in manufacturing with wage rates of its U.S. counterparts, at a nominal average annual increase of 10% (5% real) until year 28 100

97

100

100

89 86,24 70

64,17

56 50

47,75

28

Equalisation year 28

65,86

55,35

44 35

74,39

78,92 76,69

81,29

45,02

41,19

35,53 30,78 21,04 14,38 9,83

0 Year 0

5 years

10 years

U.S. wage rate ($) –Avg. Inflation 3,0%

15 years

20 years

27 years

Mexico's PPP real wage rate ($) – Avg. Inflation 5%

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 U.S. 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.

February 2013

25 years

The Jus Semper Global Alliance (WGMex 96/11)

28 years

30 years

Equalisation index reached

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

36

Prospectus

§ Prospectus. 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 impose 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, (such as The Economist) like to portray, the deep impoverishment of Mexicans is an incontrovertible fact. Official data acknowledge that 81% of Mexicans are poor (Coneval 2009). By the same token, in 2011 the minimum wage was able to afford 11,9% of the 40 goods of the CBI or indispensable basket of goods, down from 49% in 1994, a 77% loss of purchasing power in 17 years (1) STPS: Salarios Mínimos Vigentes 1994 & 2011; 2) Laura Juárez Sánchez: Polítíca 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

which is deemed essential for survival. Moreover, the new government maintained in 2013 the 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 10% of all salaried workers can afford the CBI in 2013. 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.

2011, Número 87),

§ 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 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 population is more than guaranteed, in such a way that the odds in favour of making the closing of Mexico’s living-wage gap a reality in the term of thirty years is currently zero.

February 2013

The Jus Semper Global Alliance (WGMex 96/11)

37

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

February 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 (WGMex 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

38

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)

February 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 (WGMex 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

39

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

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)

February 2013

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

$ $ $ $ $

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 (WGMex 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

40

*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.

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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.

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