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Advantages of the Purchasing Power Index
1. The PPI methodology provides easily understood data. Anyone who has
ever worked and saved
for something understands the concept of “How long do I have to work to
be able to afford something?”.
2. The PPI methodology is a transparent methodology as a whole process. In addition, each step in the methodology is transparent. Both the methodology and the results are easily understood.
3. The PPI methodology automatically factors in the effects of inflation as well as the effects of changes in wages and/or prices. It also allows for the inclusion of the benefit of wage additions such as subsidies, benefits, bonuses and any other additions to a worker’s income. When these additions supply the items noted in any of the different wage levels, the cost of those items can be deducted from the total required for a worker to meet that given wage level standard. In calculating the benefit of any of these factors, care must be given to not presume that a specific wage addition item takes the place of income needed to meet other needs. Employers, not employees, decide upon wage addition items. Certainly wage addition items add to the lifestyle of the workers and their families. However, the presence of the items may or may not supply life essentials for workers and their families.
Advantage #4
The PPI methodology allows for specificity in each
geographic “focus area” while providing data
that establishes a basis of comparison between one geographic location and
another. Because costs
differ from area to area, the wages required to meet those costs will also
differ. The PPI provides a clear
methodology for comparison. A
comparison of the cost of self-sufficiency in rural, suburban and urban
regions within a country is also possible.
These different locations can be as varied as comparisons between urban
and suburban locations
within a state, between different cities in a country or between different
countries, such as on different
sides of a border. The
ability to compare purchasing power from one geographic area to another
means that the PPI provides the
data to track the effects of jobs being moved from one country to another.
Chief among these effects is the
purchasing power that may or may not be transferred from the old group of
workers to a new group of workers
in another country.
Advantage #5
The PPI methodology allows for both specificity and comparison over
time. Any future follow-up studies provide the data in the same form:
minutes of purchasing power required (minPP). It is therefore relatively
simple to see what progress has been made by workers in their struggle to
meet basic needs.
For example, the PPI can determine how many
minutes of work were necessary to purchase a pound of chicken or a gallon
of gasoline in July 2000 in a particular geographic location and then at
three or six month intervals after that. This allows us to determine the
effects of inflation, currency devaluation, new contracts, and/or wage
increases.
The PPI methodology is based on affordability. It
totally avoids the distracting discussions about whether or not persons
make prudent use of their financial resources. It removes the whole
question of judgment of values normally involved in decisions as to how
one spends one’s money. The PPI states what is possible in terms of the
purchasing power accruing as the result of a normal workweek.
At different wage levels, what changes are the “prices in
purchasing power minutes” or the “cost in work minutes” according to
the varied wage levels. Questions as to whether a person is spending money
in a manner which another person might consider “frivolous” are no
longer part of the discussion. The emphasis is on what is affordable, not
what is chosen for purchase.
Advantage #6
The PPI methodology allows for the items chosen
for pricing to be culturally sensitive. By doing actual pricing, the PPI
pricing lists can be inclusive of foods and other items particular to any
group within any local population.
In addition, the PPI allows for the cost of the
community or cultural demands in a worker’s life to which he/she is
required to contribute. Another way of saying this is that wage levels
need to be culturally honorable. For example, the contributions required
of a person when there is a wedding, or a birth or a death in the
community need to be financially possible.
Advantage #7
The PPI creates a means of comparing the purchasing power earned by
workers/employees at different wage levels, including management wage
levels. It also allows comparison of the effects of wages paid by
different employers whose workers do the same work.
Advantage #8
The PPI changes the context of the
expression “minimum wage”. There are questions that then can be asked:
1) Minimum in terms of what context?
2) Is a minimum wage the minimum amount that a person needs
to survive?
3) Is it the minimum established by the local governing power
as the least
amount that the employer is obliged
to pay the employee?
The PPI methodology provides precise calculations
accepted by corporations, non-governmental organizations (NGOs,) religious
investors and other members of the socially responsible investing
community. The varieties of groups that have commissioned the prior
studies undertaken by CREA testify to its acceptance and relevance. The
response of numerous public groups that have read public reports of the
past studies has been overwhelmingly positive.
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