lunch up north

Darrel and I took Mom to lunch at Jake's a couple of days ago.

She loves the place. I suppose because it has a lot of good memories for her.

When Mom, Dad, and Darrel were in the trucking business, they spent a good deal of time at Jake's. Back then, the restaurant was part of a large truck stop complex of the same name. It was a place to fill the diesel tanks while the drivers filled their own tanks.

The truck stop is long gone. The restaurant is now miles away in Bend tucked behind a car dealership. The trucks are gone, but the menu still features the type of meals that the Knights of the American Road needed to truck on down the highway.

Mom had a large egg-meat-vegetable breakfast combination. Darrel had an interesting black and blue eggs benedict. I had a chili burger with potato tots. All of the meals were large enough to constitute a full meal at Jake's and another full meal at home as take away.

What interested me was the bill. I have often remarked at how inexpensive restaurants are in Mexico. Whenever I come north, one of the first things I do is compare the meal with what it would cost in pesos. I do the opposite at home in Mexico.

Here is the comparison:
Mom's bunkhouse $13.15 ($250 Mx)
Darrel's egg benedict: $14.15 ($268 Mx)
My chili burger: $12.75 ($242 Mx)

If you live in Mexico, with the exception of large cities and resorts, I doubt you have ever paid 250 pesos for breakfast. Where I live, you can buy a full steak dinner for that.

But I have just done something that annoys a lot of us who live in Mexico. Currency conversions are actually false comparisons. All it does is compare how many dollars one needs to spend to buy something in Mexico. But that is not a true comparison -- it actually overstates the value of goods in Mexico.

Here is an example of what happens in Mexico. Let's take a 10-peso taco on the streets of Barra de Navidad. Most of us are content to merely translate that to US dollars ($.53), and will then add an editorial comment like "just try to buy a taco at Taco Bell for 53 cents."

But it is a false comparison. The true test is what that 10 pesos would buy elsewhere in the Mexican economy.

The Economist has long run a price comparative index based on the cost of a Big Mac -- fondly referred to as the Big Mac index. Every six months the editors survey each nation that has a McDonald's to determine the average cost of a Big Mac in that country, and then converts the amount to US dollars.

The Big Mac, as a top-selling McDonald’s burger, is used for comparison because it is available in almost every country and manufactured in a standardized size, composition, and quality. The result is a standarized method to illustrate the difference in national "individual purchasing power."

Based on the 2019 index in equivalent US dollars, a Big Mac would cost $5.74 in the United States and $5.16 in Canada. In Mexico, it would cost $2.65. Based on that index, Mexico's "individual purchasing power" is over 2.16 greater than the United States.

That is one reason, wages seem to be so low in Mexico. Actually, they do not seem to be low. They are low in absolute terms. When compared to northern wages they seem to be a pittance. A weekly wage of 1500 pesos (about $80 US) for a service industry worker is not unusual in the area where I live. Construction workers earn about the same.

Because the base wage is so low, a lot of northerners (including me) pay more than the market-oriented wage. And I will probably keep doing that.

But there is a cost for that sense of charity. As any economist could tell us, increasing wages without increasing productivity will result in an increase in the cost of living.

During the past two years, I have talked with several six-month tourists who are appalled at how costs have increased in our community. Several have decided to stop coming to the area because they can no longer afford it.

They are the canaries in the coal mine. If their budgets cannot meet the local increased costs, it is easy to imagine how this cost shift has affected my Mexican neighbors (especially those who have experienced only cost increases and not the benefit of northern largess).

But there is an even starker illustration of the difference of individual purchasing power in Mexico. I suspect most northerners who come to our area are middle class.

According to the OECD, to be considered middle class, an American family would need to earn $40,425 to $120,672 annually. For Canadians, it is $29,432 to $78,485 (in US dollars).  For Mexicans, it is $15,000 to $45,000 (in US dollars). It is easy to see how price increases can push Mexicans, who have fought their way into the middle class, to once again be dumped into a low-income status.

So, what can those of us who want to be responsible members of the Mexican community in which we live do?

The first is obvious. When we agree to pay a wage for a job, pay it immediately under the terms of the agreement. The Old and New Testament rank failure to pay a worker's daily wage as a sin because it is socially unjust.

Second, be wise in setting wages. If you need a worker to speak English, the wage will be (and should be) higher because you are paying for a skill in addition to the basic job.

Third, in setting wages be aware that paying amounts higher than the standard local wage can have an adverse affect on local costs. Your charity can actually harm people you have never met.

I doubt my little lecture will affect my own behavior. If you were charitable up north, you will be here, as well. And that is a good test to apply here.

As Sean Connery would say: "Here endeth the lesson."