Government announces 20% hike in minimum wage; biggest in 44 years: labor secretary

The minimum wage will increase 20% to 123.22 pesos (US $6.50) per day on January 1, the federal government announced on Monday.

Speaking at the National Palace in Mexico City, Labor Secretary Luisa María Alcalde said the hike is the largest in real terms in 44 years. It is seven times the current annual inflation rate, which decreased to 2.85% in late November.

Alcalde said the increase was possible thanks to the support of unions, employers and President López Obrador.

The minimum wage will also increase in the northern border region, although only by 5% to 185.56 pesos (US $9.80) per day.

The decision to raise the wage both in the north and across the country was taken unanimously by the members of the National Minimum Wage Commission council. Some 3.44 million workers will benefit.

Alcalde said the 16% increase to the minimum wage implemented at the start of this year did not lead to higher inflation, pointing out that inflation rates are in fact among the lowest in four years.

The northern border region provided even greater proof that the minimum wage increase didn’t drive up prices, the secretary said, because the wage doubled there at the start of 2019 but inflation levels are lower than in the rest of the country.

For his part, López Obrador said the wage increase will help the economy “because it strengthens the internal market.”

Higher incomes will result in more sales for businesses which will stimulate economic growth, he said.

The president thanked the business sector for supporting the increase and said the government will continue to push for a higher minimum wage in order to recover lost purchasing power. However, he said that increases must occur gradually to ensure that they don’t hurt business.

López Obrador declared that the stage is now set for greater growth and wellbeing in Mexico, although he acknowledged that the government still has a lot to do to ensure that they are achieved.

“We have unbeatable conditions for growth and wellbeing . . . We’re going to pacify the country, we’re going to solve the serious problem of violence and insecurity . . . We’re going to be the happiest Mexicans and have a society that benefits the next generations. I’m aware that a lot still needs to be done,” he said.

Business Coordinating Council president Carlos Salazar Lomelín said the wage increase was “great news for Mexico.”

He said the business group will now push for Mexicans to earn salaries of at least 6,500 pesos (US $344) per month – a figure 73% higher than the minimum wage – so that workers can adequately support not just themselves but also their families.

“We will make constant efforts . . . to try now to . . . reach the minimum wellbeing line for families . . .” Salazar said.

The business leader’s commitment comes a month after 100 Mexican companies announced that they will raise the minimum monthly salary of their employees to 6,500 pesos.

According to the chief Mexico economist at the Bank of America, the minimum wage hike will likely prevent core inflation from slowing further even though the economy is weak.

In a report published last week, Carlos Capistrán argued that a 20% minimum wage increase will also limit the central bank’s capacity to further cut interest rates.

The Bank of México will only reduce rates by half a point to 7% next year, he predicted. That would still leave Mexico with one of the highest real interest rates (borrowing costs minus inflation) in the world, the news agency Bloomberg reported.

Source: El Financiero (sp), El Universal (sp)