Wage rate gap comparisons for selected economies
- Although many nominal wage rates increased in 2014, they all devalued in 2015, averaging a drop of 12,6% in dollar value. Yet, of the 12 economies in this assessment, only half recorded a drop in their equalisation rates in 2015 vis-à-vis 2014, five were able to experience no change and one improved its position. This makes evident that manufacturing wage rates in local currencies increased enough to compensate for the drop in value in U.S. dollars and, more importantly, to compensate for fluctuations in purchasing power parity rates for private consumption. Nonetheless, equalisation trends for most economies have been stalled since 2010. Only Singapore has been able to sustain a growing trend. In contrast, the UK equalisation index has been dropping since 2006 and it is at its lowest level since 1996.
- Among East Asian countries, South Korea has not been able to sustain its growing trend and instead declined in 2014 and then stalled. Japan shows a similar equalisation trend and has been declining since 2014 as well. After strong gains since 1996, particularly for South Korea, both reached their best position in 2012 or 2013, but in 2015 both dropped back to the levels recorded in 2010 for South Korea and 2006 for Japan, with Eq-Idx of 66 and 67 respectively. Singapore in contrast has been able to sustain a growing Eq-Idx, and despite a drop in 2013, it has now been able to recover and reach its best position ever, with a 78 index in 2015.
In line with the current trend, Australia reached its best equalisation in 2013 (88) and then stalled in 2014 and 2015. The Australian dollar devalued 6,3% in 2014 and almost 16,7% in 2015 for a total devaluation of almost 22% for the period. Yet, a drop of 20% in the PPP cost of living in U.S. dollar terms, enabled Australia’s manufacturing wages to only drop from an EQ-Idx of 88 in 2013 to 87 in 2014 and 2015. The UK has lost another two points since 2013, and it is now 18 points behind its best Eq-Idx of 2006, by producing legions of cheap workers, or, as Guy Standing would say: “the Precariat”. Canada continued at its lowest level since 1996 with a 79 Eq-Idx.
Due to the devaluation of the euro against the dollar, France, Italy and Spain have reached a plateau at their highest or close to a highest Eq-Idx since 2012. Germany has also stalled, but unlike the other economies, it has done it ten points below its highest level, recorded in 2000 (131). Despite the stagnation trend, France was able to remain at its highest Eq-Idx level in 2015.
Brazil has no longer sustained its Eq-Idx due to the deep recession that has ensued in the last years. There is nothing new in Mexico’s performance. Mexico’s track record since 1996 (and since 1985 if we look back at production-line hourly wages) exposes a deliberate State policy of maintaining real wages at the level of modern-slave-work wages.