Behavior analysis of real wages in Mexico, 1995-2018

Abstract

Objective: To determine, through econometric analysis, which of the variables inflation, real exchange rate, unemployment and consumption have a priority impact on workers' wages and, therefore, on production. Design/methodology/approach: A multiple linear regression model of the behavior of macroeconomic variables in Mexico from 1995-2018 was developed, for which the Ordinary Least Squares method was used, using the Gretl statistical package. Results: The analysis of the model showed that inflation, the exchange rate and unemployment turned out to be highly significant. On the other hand, consumption was not significant. For the model of real wages in Mexico, a coefficient of determination equal to 0.87 was obtained, that is, 87% of wages were explained by the variables included in the model. The relationship of consumption, unemployment and inflation with respect to wages was as expected, in the case of the exchange rate, the relationship was the opposite. The wage-unemployment elasticity had the greatest impact. Study limitations/implications: The main limitation of the work was the database used since it is based on official sources and these show inconsistencies and lack of data. Findings/conclusions: The study allowed us to analyze whether the proposed variables affected Mexico's economic growth. Because we are not a first world country to offer high salaries, we must expect that the Mexican economy will continue to grow until it obtains higher per capita income. In this sense, it is important to review to what extent the proposals of the new government will be able to face the reality in which very few jobs are created beyond the figures and when they are created, they are low-quality jobs.