Mexico to Increase Minimum Wage by 15% on January 1

Mexico’s daily minimum wage will increase 15% to 141.7 pesos (US $7.15) on January 1 after the National Minimum Wage Commission (Conasami) approved the hike last week.

Members of the federal government and the labor sector voted in favor of increasing the daily wage 18.5 pesos (US $0.93) from its current level of 123.2 but business sector representatives opposed the hike.

The daily minimum wage will also increase 15% in the northern border free zone, rising to 213.4 pesos (US $10.76) from 185.6.

Approval of the increase came a week after President López Obrador described the current minimum wage as an “embarrassment” and recommended raising it at least 15%. The new hike follows a 20% increase at the start of this year and a 16% rise at the beginning of 2019. In just over two weeks, the daily wage will be 60% higher than when López Obrador took office in late 2018.

As a result of the latest increase, Mexico will rise eight places to 76th on a list of 135 countries ranked according to their minimum wage, the federal Labor Ministry said. The government’s objective is for Mexico to be among the top 60 by the end of its six-year term in 2024.

The government and the labor sector say the 15% increase will provide a much-needed boost to workers’ purchasing power but the business sector warned that the hike will cause the closure of businesses and a rise in unemployment as the coronavirus pandemic continues to take a heavy toll on the economy.

The Business Coordinating Council, an influential umbrella organization that represents 12 business groups, said that many small and medium-sized businesses won’t have the capacity to pay the higher minimum wage to their workers.

It said that if businesses’ revenue doesn’t increase over the next three months, as many as 700,000 of them could be forced to close.

Gustavo de Hoyos, president of the Mexican Employers Federation, also said that 700,000 businesses could disappear due to the lack of government support during the pandemic and “now an irrational increase to the minimum wage.”

“Combined with the acceleration of [coronavirus] infections … and the resulting closure of the operations of more companies, the collapse of thousands of businesses and the loss of more sources of work is imminent,” he said.

In contrast with that view, Conasami president Luis Munguía, the government representative on the commission’s council, said a higher minimum wage “strengthens the domestic market through increased consumption.”

For his part, labor sector representative José Luis Carazo said: “We’re aware of the situation due to the pandemic but we’re also aware that the purchasing power of workers has deteriorated a lot.”

He added that wages are not currently a factor that is causing inflation.

López Obrador said last week that previous governments let the minimum wage stagnate on the grounds that increasing it would cause inflation to rise. However, the president said that the hikes approved during his time in office have not caused inflation, an assertion backed up by official data.

Source: Banderas News