Mexican President Andres Manuel Lopez Obrador lifted the minimum wage by 20 percent for workers in most parts of the country, following a 16 percent hike in 2019. Those earning the minimum wage in Mexico now make 123.22 pesos, or about $6.53 a day.
Lopez Obrador’s administration, which rose to power in 2018 under a pledge to tackle corruption and inequality, says 3.4 million wage earners will benefit from the pay increase. It has heralded the move as a historic measure to offset decades of dismal wages in Mexico. “We haven’t seen something like this in four decades,” Lopez Obrador told journalists when he announced the pay rise.
But the impact of Lopez Obrador’s decision appears limited. Factors such as Mexico’s outsized informal economy, a historically depressed minimum wage, and persistently low wages in formal jobs mean the pay hike leaves much of Mexico’s working poor untouched. And the change has little potential to lift minimum wage earners out of poverty.
The minimum wage that workers in Mexico receive since January 1, 2020 had an increase of 20 percent compared to 2019 (102.68), staying with a fixed amount of 123.22 pesos per day.
Said increase benefits 3.44 million workers in the country , according to Luisa María Alcalde Luján, secretary of Labor and Social Welfare.
It should be noted that the 123.22 pesos apply in the area called ‘Rest of the country’, while in the ‘Free zone of the Northern border’ the minimum wage went from 176.22 to 185.56 pesos per day.
Why is more paid at the border?
There are several reasons, but the main one is to avoid the flight of Mexicans to the United States so that they have an incentive to stay in Aztec lands.
The Secretary of Labor and Social Security, Luisa María Alcalde Luján, assured that the increase benefits 3.44 million workers in the country.
This was the second consecutive annual increase in the minimum wage.
What is a minimum wage and who earns it?
The minimum wage is the minimum wage or minimum wage that an employer is obliged to pay its workers for the work they have done during a set period. Each country imposes the legal norms to regulate it.
This amount, received by formal workers, in theory, would have to cover their common and fundamental expenses to provide themselves with a decent life.
What is the minimum wage by Zones in Mexico?
Since last year (2019) the minimum wage has only covered two areas of the country, Zone A, which is practically the entire Mexican territory, and the Border Zone, which for Mexican Law covers the international dividing line and the parallel line located at a distance of twenty kilometers towards the interior of Mexico.
Valid: January 1, 2020
Zone A: $ 123.22 pesos
Border Zone: $ 185.56 pesos
Indexing minimum wage
For decades, Mexico’s minimum wage was capped so it rose in sync with inflation. That was in part because the minimum wage, starting in the 1980s, was tied to the amount people paid in fines along with what they received in housing credits, social security, and other social services, says David Kaplan, a labor economist at the Inter-American Development Bank.
Some economists warn that sudden or frequent hikes in the minimum wage can result in what’s known as “wage push inflation”, as employers raise the prices of goods and services to offset the increased cost of paying salaries. Despite worries that Lopez Obrador’s previous 16 percent increase to the minimum wage would do just that, Mexico’s inflation dropped to 2.83 percent in 2019, a four-year low, according to INEGI.
“I think it’s overblown,” Kaplan says about fears that this year’s hike to the minimum wage could spark high inflation. “Recent experience suggests the impact is quite low,” he says.
“I see the recent pay increases as positive, but they can’t be replicated forever,” Moy says.
Runaway inflation in Mexico in the 1980s spooked officials away from raising the minimum wage when it was indexed to services. The government kept the minimum wage low for years and it stayed there, Kaplan says. Then in 2016, a constitutional reform divorced the minimum wage from social services and fines. The government began increasing the wage.
“The question is,” Kaplan says, “once inflation was under control, why wasn’t it increased?”
Persistent low wages
Persistent low wages in formal jobs are one reason economists say more than half of Mexico’s workforce remains under the table, peddling goods in outdoor markets called tianguis, selling food at streetside stalls, or working in small business often consisting of just a handful of people. While these jobs do not provide state-mandated benefits such as health insurance, in some cases, the pay beats that of formal-sector alternatives.
More than 17 million formal workers in Mexico earned between one and two times the minimum wage last year, according to INEGI. And many Mexican workers jump between the formal and informal economies throughout their working lives, Moy says.