Real wages in Peru rose when the economy was advancing in the 1950s and 1960s but then began to go down persistently. From 1956 to 1972, average wages in manufacturing increased at an annual rate of 4.1 percent. But then from 1972 to 1980, they went back down at the rate of 3.6 percent a year, and from 1980 to 1989 they went further down at the rate of 5.2 percent a year. Although comparisons of real wage levels over long periods are inherently uncertain, given many changes in the structures of wages and prices, it seems evident that real wages in Peruvian manufacturing were much lower in 1989 than they had been a third of a century earlier.

Even in comparison with the sharp fall in manufacturing real wages during the 1980s, the concurrent plunge in real minimum wages for urban workers was appalling. While the average for manufacturing fell 58 percent from 1980 to 1989, the real minimum wage fell 77 percent; the purchasing power of the minimum wage in 1989 was less than one-fourth its level in 1980.

The minimum wage applies to legally employed workers in the formal sector. The much larger number of workers in the informal sector, not covered by the minimum wage, also lost purchasing power in the course of the 1980s but apparently not as drastically. An index of real earnings in the informal sector shows a decrease of 28 percent between December 1980 and December 1989. That index also shows extreme volatility. Real earnings rose steeply between December 1980 and December 1987, almost doubling in this period, and then plunged to a level far below the starting point.


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