I think many people would be surprised to learn that Mexico’s current minimum wage is around US $13 per day in most parts of the country.
Perhaps more surprising is that this amount represents a significant increase over the past several years. Former president AMLO made a step change in Mexico’s minimum wage a signature initiative of his administration, more than doubling the minimum wage from what it was at the start of his six-year term in 2018. A recent report indicated that Mexico showed the highest increases in its minimum wage of all of the 38 OECD countries since 2020.
Likewise, it is estimated that the number of Mexicans living in poverty declined by nearly nine million since 2020.
Just recently, newly elected President Claudia Sheinbaum announced that further minimum wage increases will be an important part of her platform, with a goal of increasing it by an average of 12% per year during her six-year term. She has set a goal for the minimum wage to be 10,000 pesos per month (approximately $500 USD / month) by the end of her administration.
In addition, new legislation has recently been proposed that would ensure that the minimum wage increase each year would always exceed the level of inflation.
For those living in the United States, I understand why there is a natural cynicism around the concept of a minimum wage.
The federal minimum wage in the United States is still only $7.25/hour. Political gridlock has kept the minimum wage at this rate since 2009 — despite significant inflation since then.
As a result, many cities and states in the U.S. have enacted their own laws regarding minimum wage, so the federal rate has become far less relevant. In fact, it is estimated that just 1.3% of all hourly workers, the lowest percentage on record, actually earn the minimum wage.
In Mexico however, things are starkly different.
It is estimated that nearly 40% of the workforce makes the minimum wage or less throughout the country. I will repeat that sentence again as I think it is so important: nearly 40% of the Mexican workforce makes less than $13/day.
Perhaps this statistic sheds more light on why our team at MND is so passionate about our role in helping to shape the narrative on Mexico, and to help encourage more investment and tourism to the country. There is still a very, very long way to go to reduce the levels of working poor that many foreigners don’t see beyond their all-inclusive hotel, business compound or Expat neighborhood.
I have spoken to many businesspeople in Mexico who have expressed cynicism toward the minimum wage as well, but I don’t think their arguments hold weight.
One argument that I have heard is that “the minimum wage is irrelevant and really just a number that the local unions use as a reference point to negotiate their contracts.” Others argue that so many workers in Mexico are part of the informal economy that the minimum wage increases would not benefit them. This in fact is not true and research from several recent studies by the ENOE (National Survey of Employment) and the Coneval (National Board of Social Policy) have shown that as the formal economy minimum wage increases, it puts pressure on the informal economy wages at an even faster rate.
Another more common argument I often hear is that “Mexican workers will not be competitive with other countries (mainly China) if the minimum wage is increased.” I think that this argument is outdated for a number of reasons:
- China’s cost of labor has risen significantly over the past decade. Most studies now show that Chinese labor is actually more expensive than Mexican labor. Even when taking into account labor productivity, Mexican labor is still less expensive than Chinese labor.
- In addition to labor costs, companies are now considering many other factors such as supply chain risk, proximity to the U.S. market, shipping costs and timing, etc. that help Mexico and Mexican workers make a stronger case for higher wages than before.
- Mexico and Mexican labor are increasingly “moving up the value chain” and moving beyond basic low-skilled jobs to ones that incorporate automation, technology, AI and increased training. This improves productivity and allows companies in Mexico to be more efficient, more competitive and improve pay for their employees.
Running a business and hiring staff is not easy. A careful balance is needed of training and motivating employees, while staying competitive to stay in business. Not getting this right at the individual business level can be disastrous, as I wrote about here.
Not getting it right at the country level can also be a problem. I have previously written about how this can cause a “middle-income trap” that slows down a country’s progression.
Putting aside politics, I think Mexico is on the right path to getting this balance right.
On one hand, the federal government is pushing the minimum wage up from what most certainly is an unlivable level. On the other hand, the private sector is making significant investments in training and automation to ensure that, even with the higher wages, Mexican labor remains cost/productivity competitive.
The balance is not easy to achieve, but what I see at this point indicates that Mexico is on the right path of continuing to attract investment while improving the standard of living of its workers.
Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for over 27 years.
Very well written – increasing the level of education, the ability to read and write and think critically, will also continue to help reduce the number of people living at or below the poverty line. In turn this will push wages higher. Being able to fill the 100s of thousands of jobs that are coming to Mexico with educated works is crucial.
Agree that Mexico is on the right track. The focus on industrialization, on trains and transportation, oil and other natural resources, and education are more important than the raise in wages, which is an important factor in itself. China is still the top manufacturing nation despite their higher wages because of the focus on infrastructure and education. The US, Canada and Europe think of Mexico as human- and natural resources, and nice beaches. To this end, rising Mexican wages might cause problems for businesses and make vacations more expensive. However, an economically strong, sovereign, stable Mexico is good for the whole region.
Raising minimum wage is a way to buy votes, keep the masses (Generally un-educated) thinking that the government is doing great things for them. When in reality every extra Peso they bring in will be eaten up with the things that they buy. As those above (John and Geoffery) have stated, Education is the key and as long as Mexico does not have a quality public education system, at Least 40% will live in poverty, regardless of where the minimum wage is set at.
As noted in the story (and across major economies generally), increases in the minimum wage reduces poverty among both those making the wage AND workers in the informal economy ‘below’. A rising tide lifts all boats.
Yes T. You’ve hit the nail right on the head. What we have seen over the past 6 years are typical populist moves to buy votes among the uneducated masses who sadly are make up the majority. And,moreover, the strategy worked.
The Peña Nieto goverment (2012 to 2018) did try to reform the public education system (along with the energy sector) but MORENA swiftly reversed these reforms giving power back to the Unions and ensuring further stagnation. Never mind. Reality will soon set in once the Government runs out of money and investors are scared away by a lack of judicial security and then things will get really untidy.
The rising minimum will force employers to start looking at achieving productivity gains instead of simply throwing more workers into the mix. I think this will help drive the education others are talking about. There was a time in the not that distant past when major companies were also major educators, this is needed here and I hope it happens.
As others suggest- education is hugely important. Please know you cannot legislate wealth. I wish to see articles on how undervalued the importance of education is.
Maybe that’s where to start- teaching first the importance of education.
All I feel quite certain about is that (relative or not) wealth follows education.
I think that until you pay teachers, police and other puclic servamts a decent livable wage you won’t drive tje improvemnt I’m public eeducation that is the base of losing poverty and improving productivity.
Teachers not only need better pay and working conditions but they need to be better trained and equipped as well. Think about the fact that a primary school teacher can start teaching with a normalista or normal school degree, which is the equivalent of a high school diploma and that a middle or junior high teacher can take courses to complete a licenciatura, a BA or BS degree, while teaching with a normalista certificate. On the preparatoria or high school level, teachers are usually professional people like lawyers (teaching social studies) or engineers, chemists, physicists or biologists teaching math and science courses. Most are not professional teachers. Many of them are doing this as a way to earn extra money. Mexico needs a well-trained, well-paid full time professional teaching corps.
Add to this the overcrowding in classrooms on all levels (40, 50 & 60 students per group) and the deplorable physical state of thousands of schools across the country (no electricity, running water, windows, basic equipment, etc) and it becomes obvious that not enough resources are being made available. Actually, the education budget in many administrations has been reduced when it should have been increased.
Plenty of people are living on less than the oficial minimum! It’s disturbing that the percentage of workers in Mexico who earn less than the minimum wage is considerable. According to data from the second quarter of 2024, 27.1% of workers are informal, suggesting they may receive low wages. Additionally, it is estimated that 34.5% of informal workers are women with an average salary of 4,780 Mexican pesos, while 65.5% are men with an average salary of 6,340 Mexican pesos.
Unfortunately the blatant contradiction in the piece was totally missed : the very reason US and Canadian tourists come here (also to retire) IS the extremely poor pay and conditions ; a night in an all inclusive is MORE than a MONTHS pay for the staff who will travel up to 3 hours to work because they can’t afford to live in traditional areas because of tourists and condo development for retirees.
Destroying MORE of the coastline for appalling menial jobs is not the answer
Otro artículo para hacer un llamamiento a las élites liberales y socialistas para que vengan de Canadá y Estados Unidos a México. Si no pueden aprender nada de Estados Unidos, aprendan que el mercado, las condiciones del mercado y la economía determinan la tasa de mano de obra, no el gobierno. Cuando se aumentan los salarios, se aumenta el costo del producto final, por lo que el costo de las verduras, que es todo lo necesario para la vida diaria, también aumenta. Así que todo sigue igual, se paga más a la gente, los precios suben tal vez más que su aumento salarial y siguen estando en peor situación y las empresas quiebran porque no pueden pagar la tasa de mano de obra. Si no creen que esto sea así, vayan a Estados Unidos, vayan a un Burger King que no son humanos, tienen que hablar con una pequeña máquina, hagan su pedido y se preparará y se les entregará; pronto los trabajadores se irán. Necesitaré técnicos para reparar los robots que los reemplacen. México es un país maravilloso y la gente parece haberse llevado bien durante siglos aquí sin tanta interferencia del gobierno; es una lástima que los socialistas hayan tomado el poder.
Another article to appeal to liberal and socialist elites to come from Canada and the United States to Mexico. If you can’t learn anything from the United States, learn that the market, market conditions and the economy determine the labor rate, not the government. When wages are increased, the cost of the final product is increased, so the cost of vegetables, which is all that is necessary for daily life, also increases. So everything remains the same, people are paid more, prices go up perhaps more than their wage increase and they are still worse off and companies go bankrupt because they can’t pay the labor rate. If you don’t believe this to be so, go to the United States, go to a Burger King they are not human, you have to talk to a little machine, place your order and it will be prepared and delivered to you; soon the workers will be gone. I will need technicians to repair the robots that replace them. Mexico is a wonderful country and people seem to have gotten along for centuries here without so much government interference; It is a pity that the socialists have taken power.
We pay our gardener and housekeeper 100 pesos per hour and give them 5% raises each year to account for inflation. Others around us pay a similar wage. We also pay for our house keeper to take a taxi home (she is older than we and it’s late on Friday when she is done). I think this is fair and respectful and is still 3x less than US rates, where we did not choose to have these services.
And don’t forget to pay all of the staf that you employ their annual bonus
“The annual bonus in Mexico is called Aguinaldo and is paid to employees in December:
Aguinaldo is a mandatory 13th-month salary payment that is at least 15 days of an employee’s regular pay. However, some employers pay up to 30 days of an employee’s salary.
Aguinaldo is paid before December 20th, and many companies pay it in the second week of December.
Aguinaldo is calculated based on a 365-day year and includes an allowance.
All employees receive Aguinaldo, including those who have been employed for less than a year”
It will be interesting to see when Mexico is out of balance with minimum wage. In CA it is so high young workers have a much more difficult entry in the work force and low wage workers must work more than one job to achieve the same income. Higher minimum wages also have negative unintended consequences which your article touched on. It will be interesting to see how Mexico handles these issues.
Thank you Travis for your insightful article and opinion, which I share entirely. It is simply a fact that for decades many, if not most, so-called expats have reaped the benefits of rock bottom wages for those who work for them. Everyone should earn a LIVING WAGE. Period. Talk of supply and demand, politics, (as in absurd cries of socialism), driving up prices etc..is just so much bullshit, To me a living wage has always been about twice to three times whatever the minimum wage is and that’s what we’ve ALWAYS paid the wonderful people we’ve been lucky enough employ and care about during decades living here. The people who find excuses for reaping the benefits of exploiting poverty by paying good people low wages always whine and complain about everything except either paying a living wage or doing the work themselves.
In April the minimum wage was worth $15.24 US, now it’s worth $12.28. The loss of $2.96 is 19.5%. If the goal of a 12% raise is realized, in 19 months it’ll be 9 months ago.