TABLE T5: NEW 1996-2011 REAL WAGE GAP RATES FOR THE FOUR LARGEST ECONOMIES IN THE AMERICAS (CANADA, BRAZIL, MEXICO AND ARGENTINA), IN PURCHASING POWER PARITY (PPP) TERMS, FOR ALL EMPLOYED IN MANUFACTURING

The equalisation indices of hourly wage rates for all employed in the manufacturing sector (AEM) recorded a rather powerful improvement in Argentina in 2011 whereas in Canada, Brazil and Mexico there is no meaningful change to talk about. Yet, since 1996, there are clear trends observed for all countries vis-à-vis the wage rates for equivalent U.S. workers.

While Argentina increased its equalisation index (Eq-Idx) by one-eight (12,5%) in just one year (2011) and it has more than doubled it since 1996, Brazil barely improved, Canada continued to lose ground and Mexico remains at the same level it has deliberately chosen for the past 15 years. Argentina's powerful reduction of its living-wage gap is due to a dramatic nominal wage rate increase that more than offsets the devaluation of the peso against the dollar. However, Argentina's official inflation rate is being openly contested. If unofficial rates are assumed, Argentina's improvement would not be as dramatic but still impressive nonetheless.

• Argentina's nominal wages increased by 31,3% in national currency, 24,5% in U.S. dollars and 15,1% in real PPP terms. Argentina's peso devalued 5,2% in 2011 whilst the PPP indicator increased 8,15%, from $0,57 to $0,62, or about 62% the cost of living in the U.S. However, it should be noted that Argentina's official inflation rate has become controversial in the last few years for the government has been accused of manipulating the data. Most analysts question the official rate 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 53 instead of 72, only a slight change since 2008 (51). In conclusion, Argentina's wages 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. Nonetheless, in retrospect, 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. Either way, no other country in the region or elsewhere, barring South Korea and Slovakia, has increased equalisation so dramatically since 1996.

• 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 and a smaller currency appreciation. 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.

• 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 and good currency appreciation, its PPP is also growing rather strongly, making Brazil more expensive than the U.S. for the first time.

• In 2011 Mexico's nominal wage rate barely increased by only 3,9% in local currency, 5,5% in U.S. dollars and 0.3% in PPP terms, but inflation was at 3,4%, thus effectively neutralising real wages and any gain in its Eq-Idx. In retrospect, 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, barring the Philippines, Mexico continues to have the worst position of the 31 countries in the three regions of our assessments.

Download the pdf file for Table 5 of wage gaps for all employees in manufacturing in the Americas here.