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2020 Report: Living-wage assessment – PPP Wage rate gaps for selected "developed and emerging" economies for all employed in manufacturing workers (1996 up to 2018).

Our 2018 assessment reports divergent outcomes among selected economies that were predominantly the result of a meaningful increase of hourly wages in local currency (or lack of it), exchange rates and changes in their PPP cost of living. Six economies improved their position, four lost ground and four did not change. France, Germany, Italy, South Korea, Singapore and Australia improved their equalisation index (Eq-Idx). Canada, United Kingdom, Spain and Turkey lost ground compared to their 2017 position, whilst Brazil, Mexico, Japan and South Africa experienced no change.

Among the six economies that improved their living-wage equalisation position, the main factors were the substantial increase of their hourly rates in local currency combined with a revaluation of their currency or a decrease in their cost of living in PPP terms for private consumption. In the case of the three euro-area countries (France, Germany and Italy), it was specifically the combination of the increase of their hourly wage rates with a revaluation of the euro. This allowed France, Italy and Germany to increase their equalisation Eq-Idx. This combination served to offset their increase of their PPP cost of living, and increased their advantage over the increase of the US hourly rates in real terms. A similar behaviour took place in the case of Singapore and South Korea. In this way, they clearly outperformed the increase of the US hourly rate in manufacturing and thus increased their equalisation Eq-Idx In fact, Singapore’s Eq-Idx is its best recorded since 1996. Australia, in contrast, devalued its currency, but it achieved the highest improvement of its equalisation Eq-Idx among all 41 economies in our reports, which is equal to its best position previously achieved in 2014. This was the result of a strong increase of its hourly rate in local currency and a currency devaluation, which contributed to a drop of its PPP cost of living.

 

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2020 Report: Living-wage assessment – New assessment of Argentina's wage rate gap 1996-2018

Our analysis of Argentina’s living wages in the manufacturing sector from a global perspective (purchasing power parities) no longer assumes that Argentina’s government will continue to regard the appreciation of real wages as a fundamental element of its economic policy. As expected, the Macri government did everything possible to resume the old centre-periphery relationship that applies a neocolonial ethos to Argentina’s economic policies. Unfortunately, his economic policies have proven disastrous, and in his four years, inflation and devaluation have exploded, the country fell into default of its sovereign debt, real wages collapsed and poverty increased very meaningfully. One clear direct consequence is that the equalisation indices for at least the 2018 - 2020 period will drop dramatically, from 50 in 2017 to low to mid 30s, which is tantamount to the levels prevalent during the 1996 - 2000 period.

After the staunchly neoliberal Macri government left Argentina’s socio-economic conditions in dire shambles, the new Fernández government is doing its best to recover the gains for the common citizen of the preceding Kirchner-Fernández governments, which will be a rather daunting task, given the recurring crises since the start of this century. For now, living wage equalisation in the manufacturing sector vis-à-vis equivalent US wages has collapsed and is destined to drop to levels reminiscent of the 2002 crisis before it begins to recover.

The new government of Alberto Fernandez immediately implemented a countercyclical package to return to demand-side policies aimed at reducing as much as possible Macri’s neoliberal ethos and his economic policy errors. Some of these are tax hikes on foreign currency purchases, agricultural exports, wealth, and car sales as well as labour protections to increase compensation for unjustified work dismissals. Also, as it happened at the start of the century, Argentina was forced to default on its foreign debt, and has just reached an agreement with vulture funds and other foreign creditors that, for the most part, fulfils their demands and not those of Argentinians. Moreover, Argentina is once again under negotiations with the IMF to reduce its never ending sovereign foreign debt. Furthermore, the economic crisis has been convoluted by the COVID-19 pandemic, which will clearly exacerbate Argentina’s deep recession. So far, inflation appears to be substantially lower in 2020 than in 2019, at 13,5% for the first six months, but expected to hover at 30% by the end of the year, despite the effect of the pandemic on an already depressed demand. As with the rest of the world, GDP will fall drastically, at least 11% and then gradually recover, more as a technical rebound rather than as true growth in 2021. All of these factors will make it difficult for Argentina to recover real wages in manufacturing and gradually bring them to their previous equalisation position relative to the 2002 crisis.

Parting from this rather negative context, the socio-economic picture for Argentina looks a lot like a loss of two decades. This would entail a colossal hardship particularly for the lower ranks of society. One of the greatest benefits of the appreciation of real wages of any country –in the context of a living wage ethos in a market society– is the direct impact on the eradication of the conditions of inequality and exclusion; conditions that have prevailed in Argentina for many decades and were only reduced substantially between 2004 and 2015. It remains to be seen if the new government is capable of performing a successful balancing act between the different variables in an extremely complex scenario. 

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New 2020 Report!
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2020 Report: Living-wage assessment – New assessment of Spain's wage rate gap 1996-2018

In 2018 Spain widened the gap of its equalisation index (Eq-Idx) after a meaningful four-point gain in 2017. The increase in its gap was largely the result of the combined effect of a drop of its hourly rate in euros and a meaningful increase of its cost of living in purchasing power parity terms, with the latter being in turn a consequence of the revaluation of the euro for the most part, since consumer prices increased less than two percent.

Since Spain joined the €uro area, hourly manufacturing wage rates generally performed better than the minimum wage, with rates consistently moving above CPI inflation, whilst the minimum wage increased at lower rates and lost value in real terms between 2001 and 2004. It was only until 2017 and 2018 that the minimum wage outperformed manufacturing wages in real terms relative to CPI inflation, ending 16% above the CPI versus only 9% for the manufacturing hourly rate. Undoubtedly, Spain’s minimum wage will greatly outperform manufacturing wages in 2019 and 2020. We will see to what extent manufacturing wages are influenced by the pressure exerted by the increases to the minimum wage when the hourly manufacturing rates become available. The government has pledged to push for powerful increases to the minimum wage in the next three years for a total increase of 26% by 2023. Yet mounting opposition from employers already forced them to increase the rate in 2020 at half of what they pretended. According to the government, the 2019 minimum wage of Spain was still below the average for the rest of Europe at 80,6%. For now, inflation has not been impacted whatsoever by the unprecedented minimum wage increase. As for unemployment, it continued to drop in 2019, from 26% in 2013 to 13,8% by the end of 2019. But, as could be expected, by second quarter 2020, it has climbed to 15,3% as a result of the COVID-19 pandemic.______________________________________________

Annual Reports
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2020 Report: Living-wage assessment – New assessment of Brazil's wage rate gap 1996-2018

Temer’s supply-side economic policies that continues with Bolsonaro’s government, have stopped any effort to improve the labour’s share of income and clearly reflect a policy of deliberate wage contention. Temer’s government passed a new law (PEC 55) that freezes all public spending for 20 years, which implies that constitutionally-protected government expenditures in the areas of health, education and other social sectors would remain stunted until 2036. This has ended Brazil’s commitment to sustain its minimum wage appreciation policy, after the minimum wage had more than doubled in real terms since 1996. As for manufacturing wages, they actually lost ground since 1996, which partially recovered from the recession at the start of the century, until the minimum wage appreciation policy had a positive influence from 2010 onwards that is now receding once again. Yet, with a renewed recession during the 2014-2016 period, that only began to subside in 2017 and will fall back into a deep recession due to the ongoing COVID-19 pandemic, and the staunchly neoliberal and predatory supply-side approach followed by Bolsonaro’s government, Brazil will not resume any gains in real terms from a domestic perspective nor will it resume the closing of its Eq-Idx, from a global perspective, for the foreseeable future. In fact, it is likely to actually increase its equalisation gap with comparative wages in the US in the coming years.

For the entire 24-year period (1996-2018), living wage equalisation of manufacturing hourly wages have not made any improvement whatsoever, and they are slightly lower than in 1996. The hourly rates recovered gradually after the turn of the century recession but by 2018 their equalisation with equivalent US wages are down to a 32 index relative to the 34 index of 1996. Our estimate for 2019, indicates that their Eq-Idx would drop to 31 as the result of a meagre increase estimate in local currency, the actual erosion of the BRL and an increase of the PPP cost of living in local currency. The compounding effect of Bolsonaro’s government predatory economic policy that is clearly anti-labour and the COVID-19 pandemic, make any change for the better rather unlikely for the foreseeable future. Hence, the prospect for living wage equalisation appears grim. 

Parting from the implications carried by the shift from demand-side to supply-side economic policy in Brazil’s current government, it appears to be unlikely that any meaningful progress will be achieved in increasing manufacturing wages and wage rates for the entire economy in real terms. In the best case scenario, wages will keep their current value. All of this is further complicated by the deep recession triggered by the pandemic.

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New 2020 Report!
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Living-wage assessment (1996-2018) twenty-eight European economies.

For the 28 European economies in our reports, far more economies increased their Eq-Idx with equivalent hourly wages of US workers than experienced a set back in 2018. As in the vast majority of cases
in the 41 economies included in all our reports, our assessment among European economies found divergent outcomes that were predominantly the result of a meaningful increase of hourly wages in local currency (or lack of it), combined by the behaviour of their exchange rates and their cost of living in purchasing power parity terms for private consumption.

The best performers in increasing their Eq-Idx among European economies in 2018 were Estonia (+6), Ireland (+4), Romania (+4) and Slovakia (+4), whilst the major under performers were Switzerland ((-7) and Hungary (-5). All European economies that improved their living wage equalisation index (Eq-Idx) with equivalent US workers, was primarily the result of significant increases of their hourly compensation wage rates in local currencies—vis-à-vis the US hourly wage rate increase of 1,8%— combined with the revaluation of the euro (4,79% or their national currency). This clearly offset their increase in their PPP cost of living and produced increases of their Eq-Id., Conversely, practically all under performers that widened their wage gap with US hourly compensation wage rates, increased their hourly rates in local currency less than the US hourly rate of +1,8% or actually decreased their hourly rate: Croatia (-1,4%), Hungary (-8,1%), Spain (-0,6%), Switzerland (-7,8%) and UK (+0,7%). Lithuania was one exception due to a high increase of its cost of living (+6,7%) despite its hourly rate increase of 2,6%, and Turkey that suffered a steep devaluation of 24,4% that offset its hourly rate increase of 13,2%.

•Among the 16 euro-zone economies, nine increased their Eq-Idx, Austria, Belgium, Finland, the Netherlands and Portugal did not change and Lithuania and Spain widened their living-wage gap. The combination of the same variables described above for all Europe drew similar results in euro-zone countries: (1) a meaningful increase in the hourly compensation wage rate in local currency (averaging 4,5%), combined with (2) the significant revaluation of the euro against the dollar of 4,8%, were sufficient in most cases to offset the increase in their PPP for private consumption cost of living (averaging 4,9%) and the increase of 1,8% of the US hourly wage rate. This resulted in a 9,5% average increase in the hourly rate of the 16 euro economies in US dollars. Some economies experienced extremely strong increases of the hourly rate in local currency. Estonia recorded the strongest increase at 17,8% in local currency —which translated into a 23,5% increase of its hourly rate in US dollars and on its Eq-Idx, equivalent to a six-point gain, from 43 to 49— followed by Slovakia at 16,8% and Ireland at 11,4% in US dollars. Only Spain and Lithuania increased their living wage gaps due to increases of 4,1% and 7,5% in US dollars that were offset by increases of their PPP cost of living of 5,9% and 6,7%, respectively.

•Among the 12 Eastern European economies, including the euro-zone economies of Estonia, Latvia, Lithuania, Slovakia and Slovenia, a marked improvement in their Eq-Idx is evident as a continuation of a powerful trend that has been closing the Eq-Idx gap since 1996, with Bulgaria, Estonia, Lithuania, Romania and Slovakia, more than doubling their 1996 Eq-Idx. The best performers in 2018 were Estonia (+6), Romania and Slovakia, with 4 points each, and The Czech Republic and Poland with 3 points each. Overall, performance was very positive for the 12 economies, once again as a result of the combination of the same variables with the same behaviour: (1) a strong increase in the hourly compensation wage rate in local currency (averaging 7,6%), (2) small change in their PPP for private consumption cost of living (averaging 3,7%), (3) a meaningful revaluation of their currencies against the dollar of 2,3%, which resulted in a strong increase of their wage rates in US dollars (averaging 9,8%), enough to offset the 1,8% increase of the US wage rate and thus increase the Eq-Idx for eight of the 12 economies. If we exclude the euro-zone economies in Eastern Europe, the gains are also considerable for Bulgaria (+1), Czech Republic (+3), Poland(+3) and Romania (+4), Conversely, Croatia, Hungary and Turkey lost ground, with Hungary recording the worst performance as the result of the steep drop of its rate in local currency (-8,1%) and increase of PPP (3,4%) and small revaluation of only 2,6%, which resulted in a drop of 6,6% in its US dollar rate and a loss of 5 points in tis Eq-Idx. Turkey recorded a steep devaluation of 24,4% but its hourly rate increase of 13,2% and the drop of 14,4% in the PPP cost of living allow it to lose only one point in its Eq-Idx.

•The United Kingdom lost two points in its Eq-Idx due to little change in its local currency wage rate (0,7%) and an increase of 4,2% of its PPP despite a 3,7% pound revaluation. Surprisingly, Switzerland recorded the worst performance in all of Europe due to a steep drop of its hourly rate in local currency of -7,8% and little change of its exchange and PPP rates, which resulted in a drop of -7,2% of its rate in US dollars and a loss of seven points.

•Scandinavia, including euro zone Finland, recorded a positive performance. Denmark gained three points, followed by Norway and Sweden with +1 in their Eq-Idx, Only Finland recorded no change. It is worth noting that Denmark, Norway and Sweden have Eq-Idx above 100 and only Finland lags with a 92 Eq-Idx.

 

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Living-wage assessment (1996-2018) – the four largest economies in the Americas (Canada, Brazil, Mexico and Argentina).

2018 in the Americas exhibits a clear set back or a stagnation in living-wage equalisation for the four economies in this assessment, with a dramatic loss for Argentina, also a loss for Canada and no
change for Brazil and Mexico in their equalisation indices (Eq-Idx) with comparable US hourly rates in manufacturing.

Canada lost a very meaningful three points in its Eq-Idx drop as the direct result of a rare drop of its hourly rate in manufacturing in local currency, with minimal change in its PPP cost of living and exchange rate. This puts Canada at an 82 Eq-Idx, which is one of the lowest positions recorded since 1996.

•Argentina has experienced a gradual erosion of its Eq-Idx as the direct result of incontrolable high inflation rates since 2008. This erosion began to deepen with the Macri government. In 2017, there was a slight recovery, just before the supply-side staunchly neoliberal economic policies of the, at the time, new government began to dramatically reverse the gains in real wages and labour’s share of income delivered by the previous governments. Contrary to its vow to reduce inflation, which averaged 25,6% in the previous government, the policies of Macri´s government averaged 41,4% in CPI inflation during its four years (2016-2019) and the Argentine peso devalued by 81%. Hence, as expected, in 2018 Argentina’s equalisation index collapsed by dropping 8 points, equivalent to a loss of 16%, the worst performance by far among the 41 economies included in our reports. A new economic crisis exploded closely resembling the 2002 collapse, and all wages have dropped dramatically. In 2018 the minimum wage increased 12,9% but inflation reached 47,8%. In 2018, manufacturing hourly rates increased 26,1% in pesos, but the 41% devaluation produced a drop of 25,7% of its hourly rate in US dollars. Thus, despite a drop of 13% in its PPP cost of living, Argentina’s equalisation index recorded a very steep drop and in 2019 will drop even more, as inflation and devaluation rates became even worse, at 54% and 42% respectively. This will take Argentina back to conditions reminiscent of its previous crisis of 2002-2004.

•After Brazil widened its manufacturing wage gap in 2014 and 2016, due to the devaluation of its currency since 2010 under a sustained recession, it managed to keep its Eq-Idx stable in 2017 and 2018, despite the fact that the neoliberal government of Michele Temer passed a law that put a freeze on public spending effectively ending compliance with the minimum wage appreciation law. Minimum wage policy serves as an indicator for all other wages and directly influences manufacturing wages. End of year inflation rates for 2015, 2016 and 2017, added up to 21%, but manufacturing hourly rates in local currency increased only 15,9% during the 2016-2018 period, As for exchange rates, Brazil’s real has managed to experience a minimal loss of only 4,5% during the same period. This has allowed Brazil’s manufacturing Eq-Idx to suffer a minimal erosion, from 32,2 to 31,6 for the same period, given that Brazil’s cost of living in PPP terms dropped 11,6% in 2018. However, Brazil’s Real lost 7,4% in 2019 and has lost 29,2% in 2020 up to the end of August. Thus the combination of Brazil’s increase in currency erosion and Bolsonaro’s reckless deepening of the anti-labour policies initiated by the Temer government, is bound to widen Brazil’s manufacturing hourly wage rates gap, in real terms, with comparable rates in the US in 2019 and 2020.

•After more than three decades of deliberate state policies to impose modern-slave-work wages, Mexico appears to be gradually reversing such policies. This has resulted in the increase of the minimum wage in real terms beginning in 2017 and 2018 with the previous government, a directive that has been reinforced in 2019 and 2020 with the present government. In 2016, Mexico’s Eq-Idx jumped to an unprecedented level of 24, an increase of 21,2% from 2015, as the result of the combination of a 15,1% currency devaluation, a low inflation (2,7%) and a nominal increase in pesos of 27,7%, which resulted in an increase of 8,4% in US dollars despite Mexico’s peso erosion. As for 2017 and 2018, the hourly rate has increased only 5,7% and 6,4% in nominal terms, somewhat above inflation rates of 2,8% and 6% respectively, resulting in a slight increase in its Eq-Idx from 23,6 in 2017 to 24,1 in 2018. It seams clear that, as expected, the government’s demand-side minimum wage policy is gradually pushing wages up in manufacturing and all sectors. 2019 should show this more clearly for the minimum wage increased 16,1%, inflation 3,6%, the peso only slid 0,1% and the US hourly rate in manufacturing increased only 0,8%, which should increase the manufacturing Eq-Idx at least one point.




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Living-wage assessment – Table T5: 1996-2018 Real wage-gap rates for fourteen selected economies, in purchasing power parity (PPP) terms, for all employed in manufacturing. *(The base table used for all PPP real-wage gap analysis)

Our 2018 assessment reports divergent outcomes among selected economies that were predominantly the result of a meaningful increase of hourly wages in local currency (or lack of it), exchange rates and changes in their PPP cost of living. Six economies improved their position, four lost ground and four did not change. France, Germany, Italy, South Korea, Singapore and Australia improved their equalisation index (Eq-Idx). Canada, United Kingdom, Spain and Turkey lost ground compared to their 2017 position, whilst Brazil, Mexico, Japan and South Africa experienced no change.

•Among the six economies that improved their living-wage equalisation position, the main factors were the substantial increase of their hourly rates in local currency combined with a revaluation of their currency or a decrease in their cost of living in PPP terms for private consumption. In the case of the three euro-area countries (France, Germany and Italy), it was specifically the combination of the increase of their hourly wage rates with a 4,8% revaluation of the euro. This allowed France and Italy to increase their equalisation Eq-Idx two points (104 and 95 respectively) and Germany one point to 126. This combination served to offset their increase of their PPP cost of living, which averaged 4,3%, and increased their advantage over the 1,8% increase of the US hourly rates in real terms. A similar behaviour took place in the case of Singapore and South Korea, which averaged an increase of their hourly rates in local currency of 6,3%, revalued their currencies an average of 2,6% and increased their PPP cost of living by an average of only 1,6%. In this way, they clearly outperformed the 1,8% increase of the US hourly rate in manufacturing and thus increased their equalisation Eq-Idx by six and three points to 89 and 72 respectively in 2018, In fact, Singapore’s 89 Eq-Idx is its best recorded since 1996. Australia, in contrast, devalued its currency, but it achieved the highest improvement of its equalisation Eq-Idx among all 41 economies in our reports by increasing it nine points to a 90 Eq-Idx, which is equal to its best position previously achieved in 2014. This was the result of a strong increase (6,6%) of its hourly rate in local currency and a 2,5% currency devaluation, which contributed to a drop of its PPP cost of living of 2,9%.

•Among the four economies losing ground, Canada was the worst, losing 3 points (82 Eq-Idx), followed by the United Kingdom (69 Eq-Idx) and Spain (72 Eq-Idx), each losing 2 points and Turkey losing one point (38 Eq-Idx). Canada’s drop was the direct result of a rare drop of its hourly rate in manufacturing in local currency, with minimal change in its PPP cost of living and exchange rate. Spain lost two points also as a result of a 0,6% drop of its hourly rate in euros—the only country in the euro area recording a drop—and a meaningful increase of its PPP cost of living of 5,1%. The United Kingdom also lost two points due to an increase of only 0,6% of its hourly rate in local currency and a 4,2% increase of its PPP, despite a 3,7% revaluation of the pound. Lastly, Turkey also lost one point due to a very steep devaluation of the lira of 24,5%, despite a strong increase of its hourly rate in local currency of 13,2% and a strong drop of 14,2% of its PPP cost of living.

•Among the economies with no change in their Eq-Idx, Brazil managed to remain with an index of 32, the same since 2016, due to the strong devaluation of its currency by 12,7% and also a steep drop of its PPP cost of living of 11,6% and an increase of its hourly rate in local currency of 2,4%, which is slightly higher than the 1,8% increase of the US hourly rate. Mexico actually increased its Eq-Idx but not enough to gain one point, thus remaining at 24 points (in rounded numbers), which is the same as in 2016. Mexico increased its hourly rate in local currency by a meaningful 6,4%, but experienced a 1,6% currency devaluation and an increase of 0,6% in its PPP cost of living, actually moving from a 23,6 index to a 24,1 index. Although Mexico appears to be improving its index, it has gained only five points since 1996, which is barely meaningful relative to the 22-years period of assessment. Japan experienced no change in its Eq-Idx due to a PPP increase of 1,3%, little increase in local currency (0,9%) and a currency revaluation of 1,6%. Lastly, South Africa recorded no change in its Eq-Idx due to a PPP increase of 2,8%, which offset the increase in local currency (3,8%), and a minimal revaluation of only 0,8%. Although this allowed South Africa to remain at its highest recorded index since 1996, its improvement in equalisation has been of only five points since 2010.

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Living-wage assessment (1996-2018) eight Asia and Oceania economies.

In 2018 Australia, Singapore, South Korea and New Zealand improved their equalisation index (Eq-Idx) in manufacturing, Japan recorded no change and China and India
experienced slight set backs. All gains are largely the result of increases of their hour wage rates in local currency in manufacturing, combined with currency devaluations or decreases in their PPP cost of living for private consumption. Conversely, set backs are, for the most part, the result of decreases in the hourly wage rates in local currency.

•In 2018, Australia recorded the best performance of its Eq-Idx among all 41 economies in our reports by increasing it nine points to a 90 Eq-Idx, which is equal to its best position previously achieved in 2014. This was the result of a strong increase (6,6%) of its hourly rate in local currency and a 2,5% currency devaluation, which contributed to a drop of its PPP cost of living of 2,9%.

•Singapore also recorded a strong performance with a six-point gain as the result of an increase of its hourly wage rate in local currency of 6,6%, a revaluation of its currency of 2,4% and minimal increase of only 0,4% of its PPP cost of living. In this way, Singapore clearly outperformed the 1,8% increase of the US hourly rate in manufacturing and thus increased its equalisation by six points to an 89 Eq-Idx, its best position ever and the second best performance after Australia in 2018.

•South Korea followed with a similar behaviour of the key indicators, gaining three points to a 72 Eq-Idx due to a 5,9% increase of its hourly rate in local currency and a 2,7% revaluation of its currency, which was enough to offset the 2,8% increase of its PPP cost of living.

•New Zealand gained one point in its Eq-Idx (56) due to a 1,8% increase of its hourly rate in local currency, a currency devaluation 2,6% and a drop of 3,5% of its cost of living.

•Japan experienced no change in its Eq-Idx (65) due to a PPP increase of 1,3%, little increase of its hourly wage rate in local currency (0,9%) and a currency revaluation of 1,6%.

•India recorded a one-point loss in its meagre Eq-Idx (14) due to a drop of its hourly wage rate in local currency of 1,7%. India recorded a meaningful currency devaluation of 4,8% and a 2,5% drop of its PPP cost of living, but they were not enough to offset the drop in its hourly wage rate and the 1,8% increase of the US hourly wage rate.

•China also lost one point in its meagre Eq-Idx (18) due to the scant increase of only 1,5% of its hourly wage rate in local currency and a very strong increase of its PPP cost of living of 10,3%, the strongest by far among the 41 economies in our reports.

•As for the Philippines, it has not reported yet an update to its “Compilation of Industry Statistics on Labour and Employment”.

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2020 Report: Living-wage assessment – New assessment of Mexico's wage rate gap 1996-2018

The staunchly predatory, corrupt and fraudulent governments of Mexico, imposed a policy of wage erosion and containment at an extremely precarious level in manufacturing and all economic sectors, as one of the pillars of their economic policy for nearly 36 years. With the current government, this appears to be changing.

Mexico’s track record since 1996 exposed a deliberate state policy of maintaining modern-slave-work real wages between 1996 and 2015. However, their wage policy appears to have changed in 2017 after the execution of consistent supply-side policies over more than three decades. For the first time the federal minimum wage was increased above inflation in 2017 and 2018. Through a so-called “Independent Recovery Amount”, the minimum wage for 2017 was increased arbitrarily by 9,6%, including 3,9% to offset the estimated CPI inflation rate. The same criterion was applied for 2018, for a total minimum wage increase of 10,4%, including a 3,9% increase to offset CPI inflation. In 2019, Mexico’s new government, vowing to implement a strong minimum wage recovery policy, increased the minimum wage by 16,2%, including a 5% increase to offset inflation and by 20% in 2020, including 5% to account for inflation. This changes appear to have a direct positive impact on manufacturing wages in real terms and on its equalisation with comparative US wages. Between 2015 and 2018 the manufacturing hourly rate in local currency increased 43,6%, and by 18,3% in US dollars after accounting for an erosion of the peso, which allowed the PPP conversion factor for private consumption to drop. The combination of these components allowed the Eq-Idx to gain five points in 2016 and then remain at this level in 2017 and 2018.

After two years, it remains to be seen if the government follows this path or resumes abiding by supply-side criteria. Mexico has the worst wages in Iberian America. We have observed 36 years of a deliberate policy of wage pauperisation that has forced a huge population to join the ranks of the precariat. While minimum wage policy appears to be moving on the right track, there are many instances of public matter with the government clearly siding with the interest of capital and not with the people. If, at the end, the labour’s share of income does not improve steadily and shows a marked increase by the end of 2024, we would have to conclude that the only goal of the government was to mitigate the worst characteristics of exploitation and not to change the structures that sustain them.

On the other hand, if the government complies with its campaign promises, it will take decades to both achieve a living-wage ethos and to close the gap with equivalent wages in the manufacturing sector, under the equal pay principle. At the very least, it will take five six-year terms to fulfil this expectation under the presumption that the current government sets the path and materialises the progress that can be achieved by 2024, as illustrated in our projections.

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