Saturday, June 15, 2024

Mexican workers will soon see a minimum wage hike. Will it help?

The minimum wage is going up! Finally, a bit of good news on the economic front.

The fact that it’s been raised so many times over the past few years is a credit to the president, who has made increases a major priority during his time in office. (Contrary to popular belief, I’m not anti-AMLO… I just believe in doling out credit and criticism when it’s warranted and the stakes are high.)

Anyway! In most of the country, it’s rising to 207.44 pesos (US $10.80) per day, and 312.41 pesos (US $16.30) per day in the Northern Border Free Zone — made up of 43 municipalities on the Mexico-U.S. border. These changes will take effect January 1.

But while this helps the country’s overall outlook, many workers will still be quite far from out of the woods when it comes to their expenses.

While the above salaries amount to 6,223 pesos (US $315.93) and 9,372 pesos (US $475.93) pesos a month respectively, Mexico’s canasta básica — a list of items that at its most basic level includes foodstuffs for one person for a month and at a more complete level includes things like transportation and education costs — has risen to over 11,000 pesos for a family of four, well above even the new minimums.

Minimum wages and salaries, of course, are what you will find in the formal sector for official employees. In the informal sector, anything and everything goes. As they say, beggars can’t be choosers, and there simply aren’t enough well-enough paid formal jobs to go around.

While some cities are known for their strong middle-class workforce, where I live, workers will put up with just about anything to hold onto a job, including waiting months for a paycheck or working only for tips.

The size of the informal economy in Mexico as a whole is 50% on a national level, closer to 30% in the more economically prosperous north, but closer to 70% in the poorer south. Some people in the informal economy work for others and are paid in cash, while others work on their own, selling what they can in goods and services as they try to make ends meet.

But even in the “formal” sector, companies are increasingly opting to hire workers as contractors in order to avoid giving them expensive benefits, such as allowing them to accrue seniority, and, yes, to avoid having to stay within the confines of minimum-wage rules.

Both in Mexico and in the United States, this is supposed to mean that contractors can typically demand higher pay than their employee counterparts. The reality, of course, is that the pay is often similar or lower, with the added circumstance of having little stability or predictability to their monthly incomes.

As a contractor at a variety of places myself, I’m feeling the pain too: work has been scarce these past couple of months, and I’m becoming increasingly nervous about how I’ll meet my own expenses.

When a patchwork of small jobs, many unpredictable, has people chronically underemployed, getting ahead becomes much more a matter of luck than of hard work. I might be nervous now, but I’m still doing comparatively great compared to most people out there!

So, how exactly are most people getting by?

Well, some people simply aren’t. Many are doing without a lot of things, as they always have, and the opportunities and financial resources for them and their descendants to pull themselves out of poverty (43.9% of the population in 2020) are very close to null.

The scandal of not just Mexico but of the world is this: you can work hard and you can work full-time hours and still not make enough money for you and your family to get by because you simply can’t force someone to pay you more than they’re willing to. Throw any kind of wrench (like an illness) into the works of a precarious, barely-getting-by lifestyle, and that’s it.

Luckily, there are some built-in safety nets forming the fabric of Mexico’s culture that can serve as a light padding on the concrete floor.

One of those safety nets is family: for the most part, families stick together and help each other out. It’s not all about benevolence, of course: people just tend to live better in groups, and family members tend to feel responsible for each other.

As you can probably tell, I’m being careful about our tendency to overromanticize the institution of the family. Yes, they’ll probably make sure you stay sheltered and not go hungry. But if you’re unlucky enough to be from an abusive family (or stuck in an abusive marriage) and lack the resources and opportunities to make it on your own, you’re very likely stuck with them if there are few avenues to make it on your own in a depressed economy.

Another major safety net is remittances, which are currently, and unsurprisingly, at record levels. If it weren’t for those payments sent here by Mexicans living abroad (mainly the U.S.), a lot of families in Mexico would be a lot worse off. It’s one of the many ways that the U.S. and Mexican economies are inexorably linked.

Some of that remittance money coming into Mexico is meant to pay off debt, but much of it is used to keep family members here afloat.

News this week of companies looking to “nearshore” by moving their operations to Mexico is welcome. But as I read through the articles, there’s no indication of how much workers will be paid, and it’s hard to be optimistic: it’s no secret that a big part of Mexico’s attraction as a hub for manufacturing is the potential to save so much in labor costs on workers used to accepting much less than their counterparts in the U.S.

What would happen if the minimum wage were raised to be enough to afford the complete canasta básica for a family of four? For informal workers, it probably wouldn’t mean much given that labor laws have trouble touching the informal economy anyway, but what difference would it make to formal employees?

Yes, it might increase inflation, though I’ve always suspected that inflation is often just as much due to those who already receive the majority of a company’s profits protecting and increasing their own salaries above all else — and raising costs for everyone else in order to do so. Taking a pay cut for the greater good hasn’t been in fashion for a very long time.

Still, let’s accept and cheer on small, incremental steps and work hard for bigger, more dramatic ones that allow everyone, not just the financially comfortable, to reach their potentials.

Sarah DeVries is a writer and translator based in Xalapa, Veracruz. She can be reached through her website, sdevrieswritingandtranslating.com

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