PPP WAGE GAPS FOR SELECTED DEVELOPED AND “EMERGING” ECONOMIES FOR PRODUCTION-LINE MANUFACTURING WORKERS. (Updated from 1975 up to 2006)

In 2006, already with the new World Bank PPP estimates round integrated (see page 28 of report), Mexican manufacturing production-line workers continue enduring the worst real wage in purchasing power parities (PPPs), for they have the greatest equalised wage gap with the U.S. (83%), when compared against other emerging economies and against eight developed economies. In other words, a Mexican worker earns only 17% of the purchasing power (material quality of life) enjoyed by the equivalent U.S. counterpart, to do the same work for a product that will be marketed globally at global prices. In clear contrast, Brazil’s wage gap –the most similar economy with available data– is clearly less dramatic (63%) than in the Mexican case, although it still has a long way to go to approach a living wage ethos, All Asian economies show higher nominal wages and smaller wage gaps than Mexico. South Korea, in particular, has a smaller wage gap than Japan in 2006 (21% versus 29% respectively) and for the second consecutive year. The five major European economies and Canada have wage gaps of less than 20% or surpluses –Germany (-23%), Canada (-5%)– vis-à-vis equivalent U.S. workers.

The 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, manufacturing and marketing operations are globalised but their labour costs remain strategically very low in order to achieve maximum competitiveness at the expense of the South’s workers. As a result, the MNCs get all the benefit. Sometimes the salaries that they pay are higher than the legal minimum wage in the host country. But, these wages still keep the 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.

The Argument

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 global sustainability.

The argument of an equivalent living wages is anchored on two criteria:

• Article 23 of the UN Universal Declaration of Human Rights, on the following points:
  1. Everyone, without any discrimination, has the right to equal pay for equal work
  2. 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 sustainability of the market system -in all three economic, environmental and social dimensions- if there is no sustained generation of aggregate demand, in that period, through the gradual closing of the wage gap between North and South. This does not mean, whatsoever, that progress should be equivalent to the increase of irrational consumption, depleting all non-renewable resources. Eventually, during the twenty-first Century, a new paradigm must be built in which the purpose of the market is the welfare of all ranks of society, and the privileging of sustainability and not of capitalist accumulation.

Yet, while that stage is reached, there is no justification at all, moral or economical, for the workers of the South not to earn wages equivalent to those of their counterparts in the North, in PPP terms, based on equal pay for equal work of equal market value. 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 blatant and perverse exploitation of workers in the South must be stopped.

The analysis is and update for 12 economies and the U.S., prepared by TJSGA, using hourly compensation costs for production-line manufacturing workers (1975-2006) as reported by the U.S. Department of Labour, and PPP data from the World Bank and the OECD. The report exposes once again a global labour system that profits over the majority of the people in favour of a global elite.

Download the pdf file with the wage gap update for 12 economies (Germany, France, Italy, Canada, U.K., Spain, Japan, South Korea, Singapore, Brazil, Hong Kong and Mexico).