Mexico has daily (rather than hourly) minimum wage laws. In 2013, the daily mini
ID: 2428622 • 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 2016, what was the Mexican minimum daily wage in terms of dollars?
b. Given that Mexican employees typically work 8-hour days, about how much per hour is the Mexican minimum wage in terms of dollars?
c. In 2016, 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?
Explanation / Answer
(a)
Daily minimum wage in Mexico = 70 pesos
Exchange rate = 18 pesos per dollar
Converting wage in dollars terms =
Amount in dollar = Daily minimum wage/Exchange rate = 70/18 = $3.89
Thus,
The Mexican minimum daily wage in terms of dollars is $3.89 per day.
(b)
Daily minimum wage in Mexico in dollar terms = $3.89 per day
Total work hours in a day = 8 hours
Calculate the per hour wage in terms of dollars -
Per hour wage = Daily minimum wage in Mexico in dollar terms/Total work hours in a day
Per hour wage = $3.89/8 = $0.49
Thus,
The per hour Mexican minimum wage in terms of dollars is $0.49 per hour.
(c)
Federal minimum wage in US = $7.25 per hour
Minimum wage in Mexico in terms of dollars = $0.49 per hour
Number of times = Federal minimum wage in US/Minimum wage in Mexico in terms of dollars
Number of times = $7.25/$0.49 = 14.79 or approximately 15 times
Thus,
The hourly US federal minimum wage is 15 times larger than the hourly Mexican minimum wage.