Mexico Raises Minimum Wage

Mexico Raises Minimum Wage for 2015 by 4.2 Percent


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Mexico’s minimum-wage commission decided last week to raise the daily minimum wage to about $70 pesos a day. Consideration for proposals to raise the wage higher than annual inflation was postponed.

Mexico City, Mexico — The Mexican minimum-wage commission last Friday determined to raise the country’s daily minimum wage by 4.2 percent — in line with current inflation — to about $70 pesos a day, less than $5 at current exchange rates.

The commission, formed by government, business and labor representatives, meets each year to determine the increase in the minimum wage, which is used as a benchmark for contract negotiations in the private and public sectors. It postponed considering proposals to raise the wage much higher than inflation to restore some of its lost purchasing power.

Mexico City Mayor Miguel Ángel Mancera, of the opposition Party of the Democratic Revolution, in August proposed raising the wage by around 23 percent to $83 pesos in 2015. To raise the wage much above inflation, which currently stands at 4.2 percent and is expected to slow to 3 percent next year, it would be necessary to change laws to unlink the wage from a number of payments, including fines and government fees that are set in multiples of the daily minimum.

A proposal to make those changes that President Enrique Peña Nieto sent to Congress earlier this month has passed the lower house and a Senate committee, but was still awaiting a vote in the full Senate when the Congress went into the year-end recess.

The proposal, which Peña Nieto said was to enable a “serious and broad” debate on ways to increase workers’ incomes, includes a constitutional amendment and so requires state legislatures to vote on it.

Central bankers and some government officials haven’t explicitly opposed a larger increase in a wage that has lost more than two-thirds of its purchasing power in past decades and is inadequate to cover most basic needs. They have, however, expressed concerns about the impact it could have on inflation if not accompanied by gains in productivity.

Central bank Deputy Governor Manuel Sánchez, considered by many analysts to be the most hawkish of the Bank of Mexico’s voting members, warned earlier this year that the minimum-wage proposals risked fueling inflation, which was the main cause of the deterioration in spending power in the 1980s and 1990s.

“This process yielded lower purchasing power for all salaries and underscores the vital necessity of protecting the significant ground gained in the last decade in the battle to control inflation,” he said.

An estimated 6.5 million Mexicans, or 13 percent of the workforce, earn the minimum, according to the government statistics agency.

Critics of the proposal argue that an increase by decree would exacerbate unemployment, particularly among low-skilled workers.

“The only way to break this vicious circle is to systematically raise productivity,” Luis Rubio, head of the Cidac think tank, said in a recent article.

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