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The Purchasing Power Index (PPI)
The Purchasing Power Index (PPI) is a tool for assessing both the purchasing power earned by workers within a particular area at the present time, and for determining what would be a sustainable living wage. The Purchasing Power index methodology is designed to provide data regarding the ability of workers anywhere in the world to meet their own needs and those of their families. The PPI has been used both domestically and internationally to assess the effects of the globalized economy on workers, their families and their communities. It accurately measures the intersection of wages, prices and inflation while providing easily understood data that allows for comparison in three dimensions:
a) Trans-Temporal
Comparisons: Purchasing power can be compared over time for any group
of workers or for workers in specific regions.
Example: Average minutes of Purchasing Power (minPP), at the legal minimum
wage level, necessary for the purchase of 1 kilo of rice (2.2 lb.) in
Matamoros, Mexico
| 1 kilo of rice in Matamoros, Mexico 1994 | 34 minPP |
| 1 kilo of rice in Matamoros, Mexico1998 | 38 minPP |
| 1 kilo of rice in Matamoros, Mexico 2000 | 67 minPP |
(Source:
The Market Basket Survey, CREA Inc., Hartford, CT, 1994,
Corporate Report, 1998, Mexico Purchasing Power Index Project, 2000)
b) Trans-Cultural Comparisons: Purchasing power can be compared from one region to another within a given state, region or country.
Example: Average purchasing power necessary for the rental of a 2-bedroom apartment in the following cities and towns in Connecticut, 1998 at minimum wage.
| Town | Cost in Dollars | Cost in minPP per week |
| Bloomfield | $800 | 2151 minPP |
| Hartford | $662 | 1780 minPP |
| Manchester | $700 | 1882 minPP |
| West Hartford | $750 | 2016 minPP |
(MetroHartford PPI Project, CREA Inc. 1998)
c) Trans-National Comparisons: Purchasing power can be compared for different groups or workers doing the same work in different states or countries.
Example: Cost of basic items in US and Mexico for General Motors’ workers doing the same work in 1994 at entry-level wages. Prices are in minutes of required purchasing power (minPP).
| Item | GM worker in U.S. | 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 |
Having a single tool that
allows for comparison in these three dimensions on an on-going basis
allows for the creation of wage standardizations tied to the ability of
workers to provide for themselves and their dependents as well as to
contribute to the communities in which they live. Much of the writing on
wages and needs of workers is written from the perspective of employers
providing what workers need on an immediate basis and isolated basis, that
is, disconnected from community and society.
It is one of the purposes of the PPI to re-establish the need to
determine wages and wage levels not only for immediate need but also with
this “placed in society” reality.
To download full versions of the PPI studies, please visit
our Publications
page
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