Mexico Increases Minimum Wage To 207 Pesos Next Year To Curb Economic Disparity

Mexico’s minimum wage will increase by 20% and will be implemented starting next year. The announcement was made by the Labor Ministry Thursday after the government sector, the labor sector and the business sector all reached a unanimous agreement.

Associated Press reported that Labor Minister Luisa Maria Alcalde declared the increase during a government press conference, stating the daily minimum wage to increase from 172 Mexican pesos ($8.80) to 207 Mexican pesos ($10.82) effective Jan. 1. However, inflation is expected to tip the scales on basic goods which will eat up most of the increase for daily wage earners. Inflation has been running at about 9% this year and is projected to continue to rise in the coming year.

The northern border of Mexico generally carries higher prices for basic goods, at which the daily wage in this region will be set at 312 pesos or roughly about $16 per day. Although the average daily wage in Mexico is 1.5 times more than the daily minimum, many Mexicans rely on the informal sector for work to make extra income. The wage hike follows Mexican President Andres Manuel Lopez Obrador’s double-digit percent raises each year since he took office in 2018 as he aimed to curb the country’s vast income disparity.

As the country continues to struggle with stubbornly high inflation rates, the Bank of Mexico also has increased its key interest rate by 600 basis points to 10.0%. The annual headline inflation hit 8.14% in the first half of November, which was down from 8.53% in October. Banco BASE Economist Gabriella Siller believed there are three main reasons the wage increase will pressure inflation further.

“One, this is a very sharp increase; two, it’s not accompanied by gains in productivity; and three, we’ve had several years running with strong minimum wage increases,” Siller pointed out.

Over 6.4 million wage workers will benefit from the wage hike as the country remains far below the minimum wage levels of its neighboring big brother. The federal minimum wage in the U.S. stands at $7.25 per hour.