The Correlation between Minimum Wage and Economic Strength in South America

Sep 5, 2017
Scatter plot of shadow economies and GDP

In South America, the correlation between economic strength and minimum wage is very weak.  Every country studied on the continent - excluding Guyana - has an annual minimum wage of at least 5,000 international dollars.

Findings

  • The correlation coefficient between per capita Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) and minimum wage in South America is 0.33.
  • As economic strength increases in South America, the minimum wage does not necessarily increase.
  • Guyana has both the lowest minimum wages on the continent as well as the smallest per capita GDP PPP.
  • Chile has the largest per capita GDP PPP but the fourth highest minimum wage on the continent.
  • Argentina on the other hand, has the highest minimum wage but only the third largest per capita GDP PPP.

Caveats

  • As always, correlation does not imply causation.
  • Bolivia, French Guiana, Suriname, and Venezuela were missing data.
  • Minimum wages sometimes vary by profession and other variables.

Details

Excluding Argentina and Guyana, every other country on the continent has an annual minimum wage between 5,766 and 8,661 international dollars.  Argentina's is 20,627 international dollars and Guyana's is 3,560.

South America is interesting because minimum wage is either set really low or extremely high for the output of the respective economy.

Per capita GDP PPP as a multiple of minimum wage, ranges from 0.97 in Argentina to 3.73 in Uruguay.

Country Codes

CodeCountry
AGAntigua and Barbuda
BBBarbados
BZBelize
CACanada
CRCosta Rica
DMDominica
DODominican Republic
GTGuatemala
HNHonduras
HTHaiti
JMJamaica
KNSaint Kitts and Nevis
MXMexico
NINicaragua
PAPanama
SVEl Salvador
TTTrinidad and Tobago
USUnited States
VCSaint Vincent and the Grenadines

Sources

US Department of State.  2017.  "Country Reports on Human Rights Practices for 2016."  Accessed September 2, 2017.  https://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm#wrapper.

"Report for Selected Country Groups and Subjects (PPP Valuation of Country GDP)."  https://www.imf.org/external/pubs/ft/weo/2017/01/weodata/weorept.aspx?pr.x=43&pr.y=19&sy=2017&ey=2017&scsm=1&ssd=1&sort=country&ds=.&br=1&c=512%2C672%2C914%2C946%2C612%2C137%2C614%2C546%2C311%2C962%2C213%2C674%2C911%2C676%2C193%2C548%2C122%2C556%2C912%2C678%2C313%2C181%2C419%2C867%2C513%2C682%2C316%2C684%2C913%2C273%2C124%2C868%2C339%2C921%2C638%2C948%2C514%2C943%2C218%2C686%2C963%2C688%2C616%2C518%2C223%2C728%2C516%2C558%2C918%2C138%2C748%2C196%2C618%2C278%2C624%2C692%2C522%2C694%2C622%2C142%2C156%2C449%2C626%2C564%2C628%2C565%2C228%2C283%2C924%2C853%2C233%2C288%2C632%2C293%2C636%2C566%2C634%2C964%2C238%2C182%2C662%2C359%2C960%2C453%2C423%2C968%2C935%2C922%2C128%2C714%2C611%2C862%2C321%2C135%2C243%2C716%2C248%2C456%2C469%2C722%2C253%2C942%2C642%2C718%2C643%2C724%2C939%2C576%2C644%2C936%2C819%2C961%2C172%2C813%2C132%2C199%2C646%2C733%2C648%2C184%2C915%2C524%2C134%2C361%2C652%2C362%2C174%2C364%2C328%2C732%2C258%2C366%2C656%2C734%2C654%2C144%2C336%2C146%2C263%2C463%2C268%2C528%2C532%2C923%2C944%2C738%2C176%2C578%2C534%2C537%2C536%2C742%2C429%2C866%2C433%2C369%2C178%2C744%2C436%2C186%2C136%2C925%2C343%2C869%2C158%2C746%2C439%2C926%2C916%2C466%2C664%2C112%2C826%2C111%2C542%2C298%2C967%2C927%2C443%2C846%2C917%2C299%2C544%2C582%2C941%2C474%2C446%2C754%2C666%2C698%2C668&s=PPPGDP&grp=0&a=.  International Monetary Fund.

Filed under: Correlations