Mexico has daily (rather than hourly) minimum wage laws. In 2013, the daily mini
ID: 1210828 • Letter: M
Question
Mexico has daily (rather than hourly) minimum wage laws. In 2013, the daily minimum wage in Mexico was about 70 pesos per day, and the exchange rate between Mexican pesos and U.S. dollars was about 18 pesos per dollar. a. In 2013, what was the Mexican minimum daily wage in terms of dollars? Instructions: Round your answer to 2 decimal places. $ per day. b. Given that Mexican employees typically work 8-hour days, about how much per hour is the Mexican minimum wage in terms of dollars? Instructions: Round your answer to 3 decimal places. $ per hour. c. In 2013, the federal minimum wage in the United States was $7.25 per hour. How many times larger was the hourly U.S. federal minimum wage than the hourly Mexican minimum wage? Instructions: Round your answer to 1 decimal place. times larger. d. If unskilled workers have a tendency to migrate to where they can obtain the highest compensation for their labor, which country is more likely to be receiving low-skilled immigrants?
Explanation / Answer
a. Daily wage in Mexico = 70 pesos.
Exchange rate, 18 pesos = $1.
1 pesos = $1/18 or $0.055.
70 pesos then would be = 70*0.055 = $3.85.
$3.85 is the daily wage in dollar terms per day.
b. First we'll calculate the per hour wage in pesos terms.
A worker in Mexico was paid 70 pesos to work for 8 hours a day, then per hour wage would be =
8 hours = 70 pesos,
or 1 hour = 8.75 pesos.
Thus per hour wage in pesos terms is 8.75 pesos.
Exchange rate in terms of dollars already calculated above, 1 pesos = $0.055,
then 8.75 pesos would be = 0.055*8.75 = $0.481 per hour.
c. The % times larger is = [(7.25-0.481)/0.481*100].
% change = 14.0727*100 = 1407.3%
The U.S minimum wage per hour is 1407.3% times larger.
d. U.S is paying higher minimum wage, 1407.3% higher than in Mexico, thus, the labour would migrate from Mexico towards U.S and U.S would receive more low-skilled immigrants.