AMLO says that Mexico’s minimum wage to rise by 20% in 2024

Mexico’s minimum wage will rise 20% starting from Jan. 1 next year, President Andres Manuel Lopez Obrador said on Friday, in a move that analysts signaled could put pressure on easing inflation rates in Latin America’s No. 2 economy.

The broadly expected increase, which follows a 20% hike last year, is the latest of a series of double-digit hikes made every year since Lopez Obrador took office in late 2018 seeking to curb Mexico’s vast income disparity.

It brings Mexico’s daily and monthly minimum wages to 249 pesos ($14.41) and 7,508 pesos ($434.64) respectively, following a consensus between the government, labor, and business sectors.

But some analysts warned that the increase could impact inflation, with Banco Base warning of higher labor costs for local firms, such as restaurant operator Alsea which said in October it was budgeting for the hike – set to affect mainly waiters and pizza deliverers.

Pantheon Macroeconomics economist Andres Abadia said the wage increase hit close to expectations but considering “sticky” services inflation and a tight labor market it could negatively impact the economy.

“It is a bit high, considering we are still coming out of a significant inflationary process that has wreaked havoc on the economy,” he said.

“There is a thin line between these excessive wage hikes and inflation (taxing the poorest) and job losses, in which the vulnerable are most impacted,” he said.

Mexico’s central bank governors have also said minimum pay is among the factors they monitor when looking at inflation.

The bank has signaled that it could start discussing cuts to its record-high benchmark interest rate of 11.25% early next year if inflation continues to ease, though it is likely to hold the current level “for some time.”

In a regular morning conference, Lopez Obrador blasted policies by previous right-wing governments that he said had driven down Mexicans’ purchasing power.

“This is historic, because it means that we will fulfill what we pledged to do at the start of our government, which is to double the minimum wage in real terms,” he said.

Voters will elect a new government in June next year. Mexican presidents are restricted to a single six-year term, and ruling party candidate and former Mexico City Mayor Claudia Sheinbaum is leading in polls.

TYT Newsroom