The minimum wage in Mexico will remain at 172 pesos by 2021. They are 31 pesos more than last year and almost double the 88.36 pesos it was worth when the six-year term began. Even with recent increases, the minimum wage in Mexico is still very low when compared to other countries. The 172 pesos are equivalent to $ 8.07 a day, less than the $ 15 per hour which is the minimum in California.
The minimum wage in Mexico for 2022 will be equivalent to $ 242 per month. This is lower than the 261 in Colombia; 309 from Bolivia; 400 from Ecuador; 423 from Uruguay; 441 from Chile. The highest minimum wage in Latin America is in Costa Rica. There they earn the equivalent of $ 531 a month. The lowest minimum wage in the American continent is in Venezuela, where it is equivalent to $ 3.54. In recent years, it is normal for that country for the minimum to register rises at the minimum of 350 or 400%, even higher. These increases do not mean a real improvement because inflation is above 1,200% per year.
The external comparison is an exercise in realism and serves to weigh what we still have to do. In any case, it should be noted that what happens at this salary level has a direct impact on the lives of 4.5 million workers, approximately 13% of the Mexican labor force. When we close up the data of those who earn the minimum wage, we find that women and young people, employed in the formal sector, predominate. They are the biggest beneficiaries of the increases.
How will a 22% increase work in a context of inflation of more than 7%? The increase will make it possible to partially recover the loss of purchasing power that has been experienced in 2021, in particular that related to goods in the basic basket. The recovery will be partial because, in some goods, less quantity will be bought than a year ago. Rice is up 77%; pasteurized milk, 48%; the egg, 33%; the beef, 28% and the bolillo bread, 25 percent. This in CDMX, according to Profeco.
What impact will the increase in the minimums have on the labor market? The minimum wage has not been a benchmark that sets a trend in contractual wage negotiations. Between January and October 2021, the average of increases agreed between companies and unions has been 4.5 percent. Far from the minimum, but also from inflation. Something similar happened last year, where contractual rates were around 4%, while the minimum rose 20 percent.
The variations in the minimum wage do not have a verifiable impact on the salaries paid in the informal sector, where more or less 31 million people work. Economists use the term Beacon Effect to describe how the minimum “radiates” to other economic variables. The fact is that in informality, the minimum wage beacon shines little or nothing.
One question to observe will be whether the 22% increase in the minimum will have an inhibiting effect on the creation of new jobs or will make it difficult to sustain existing jobs. 2022 will be a complicated year, due to the loss of dynamism in the economy as is clear in the figures for the third quarter, -0.4 percent. Just for reference, in 2020 there was a 16 percent salary increase. That year there was a loss of 6.4 million jobs in the formal economy, but the explanation lies in the covid and in the absence of significant public policies to preserve jobs. No one would dare blame the 16% rise in wages for the lost jobs.
. Lately, we have seen how officials and politicians of the 4Q take all the credit for the increases in the lows. It is necessary to remember that the first great steps were taken in the past six years and that at that time Solomon Chertorivski played a key role. From the CDMX Secretariat of Economic Development, he was an active promoter of the increase in minimum wages. It showed that there was no inflationary impact as a result of the increases in this salary level. He promoted initiatives to stop using the minimum as a reference in fines and prices of some public goods and services. It says a lot about the type of country we have been that union leaders were among the main opponents of minimum wage increases… as well as central bankers.
Editorial Director General of El Economista
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Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the PÚBLICO de Guadalajara newspaper, and has worked for the newspapers Siglo 21 and Milenio.
He has specialized in economic journalism and investigative journalism, and has made professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.
Reference-www.eleconomista.com.mx