Urban Wages and Welfare

Abstract

This chapter examines real wage trends in the more populous countries of Latin America since 1940, and discusses the relationship between wages and welfare. This is an area bedevilled by considerable problems with the data. The first problem relates to coverage. The most easily available official sources provide data for industrial wages, rather than for wages for all urban workers. Consequently, the data analysed in this chapter are both highly aggregative and of limited coverage. Secondly, depending on the methodology employed by the various national governments, the statistics on industrial wages may be more or less skewed in favour of large establishments. Since there is a positive correlation between establishment size and the level of wages paid, this means that national statistics are subject to varying degrees of overestimation. Thirdly, and perhaps more importantly, the evidence on trends in real wages is highly sensitive to the particular cost-of-living deflators employed. As illustrated in Table 4.1, a major difference in the results can be obtained when two distinct cost-of-living deflators are applied to Brazilian wage data in the period 1960–70.