Tracking the Economy What's a Living Wage?
The Purchasing Power Index (PPI) is a tool for assessing both the purchasing power earned by workers within a particular context and for determining what constitutes a sustainable living wage. The...
...An advantage of PPI is that it attempts to reestablish the need to deter- mine wage levels, not only for immediate needs, but also within the context of a particular society...
...The PPI methodology provides data that accurately and simply reflects the ability of workers anywhere in the world to meet their own needs and those of their families...
...EXAMPLE: Average minutes of Purchasing Power (minPP), at the legal minimum wage, necessary for the pur- chase of 1 kilo of rice (2.2 lbs...
...Corporate Report, 1998...
...Discussion of wages, however, whether they increase or decrease, is misleading if not understood within the context of prices at a particular time and place...
...Analysis of wages is an essential element in any plan for economic development...
...2. Trans-National Comparisons: Purchasing power can be compared for different groups or workers doing the same work in different countries...
...Since PPI allows consistent comparisons in these dimensions on an ongoing basis, wage standardizations can reflect a worker's ability to provide for themselves and their dependents as well as to contribute to the communities in which they live...
...If wages, for example, increase as prices increase, then wage increases often become inconsequential...
...1. Trans-Temporal Comparisons: Purchasing power can be compared over time for any group of workers or for workers in a specific region...
...in Matamoros, Mexico...
...Below are two examples...
...The PPI helps to assess the effects of the global economy on workers, their families and communities, because it considers the intersection of wages, prices and inflation with straightforward data that facilitate more honest comparisons...
...Prices are in minutes of required purchasing power (minPP...
...Mexico Purchasing Power Index Project, 2000...
...Item GM Worker in United States GM Worker in Mexico Rice (5 lbs) 13.5 minPP 69 minPP Cooking oil (48 oz) 11.7 minPP 113.2 minPP Coffee (13 oz) 8.4 minPP 117.6 minPP Chicken (1 lb) 5.3 minPP 48 minPP Aspirin (100 tablets) 19.3 minPP 153.5 minPP Bananas (1 lb) 2.3 minPP 20.4 minPP Whole milk (1 gal) 12.2 minPP 142.9 minPP The PPI provides a consistent and objective way of assessing the affordability of food, clothing, housing, trans- portation and other items required for an adequate living standard...
...Employers sometimes understand wages by what they perceive as a worker's immediate and isolated needs, that is, disconnected from community and society...
...1 kilo of rice in 1994 34 minPP 1 kilo of rice in 1998 38 minPP 1 kilo of rice in 2000 67 minPP (Source: The Market Basket Survey, CREA Inc., Hartford, CT, 1994...
...EXAMPLE: Cost of basic items in the United States and Mexico for General Motors workers doing the same work at entry-level wages in 1994...
Vol. 37 • May 2004 • No. 6
