This month President Sheinbaum has announced two separate news items that are both good for Mexican workers and also good from a human perspective. The first was a sharp increase in the minimum wage of 13% in 2026, applicable to most parts of the country. This increase is a continuation of far-above inflation rate increases that first began under the AMLO administration. During AMLO’s six-year term, the minimum wage more than doubled, compared to very modest increases under prior presidents. This most recent increase will bring the minimum wage to 315 pesos (or about US $17.50) per day. I have previously written about Mexico’s minimum wage here.
Many Americans might point to the minimum wage in the United States and say that it really isn’t that relevant. In the U.S. they are right, as only an estimated 1.3% of workers actually make the minimum wage. However, in Mexico, the situation is far different. Recent reports indicate that as many as 40% of Mexican workers actually make the minimum wage. Remember that Mexico still has a very large share of its workforce, over 50%, working informally. In other words, minimum wage changes make a big difference for Mexican workers.
Charted: Hours Worked vs. Salaries in OECD Countries 📊
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The second annoucement from Sheinbaum was regarding the work week. Today, the standard Mexican work week is still a 6 day, 48 hour week. Compared to other OECD countries, Mexicans work more hours per year than any other country! Until recently, Mexican workers also had relatively few holidays and vacation days compared to workers in many other countries. Under AMLO, the country doubled the amount of statuatory minimum paid vacation time for workers with at least one year of service from 6 to 12 days.
All of this is undoubtably good for workers — higher pay and more time to spend with families and friends. However, there is a downside to all of this. If economic policy was as simple as raising wages and reducing hours for workers, every country would be racing to do so. In order for these worker friendly initiatives to ultimately succeed, Mexico must also increase labor force productivity. If that doesn’t happen, the net effect of all of these initiatives will be for Mexican labor to become more expensive to companies while in turn making companies less competitive. Increased labor costs must be accompanied by increased worker productivity in a healthy company and healthy country.
So how has Mexico been doing on this measure? In summary, not well. A recent World Bank productivity study notes that Mexico’s GDP per worker has shown negative or very weak growth over the last decade. Work by OECD economists finds that the average annual labor-productivity growth in Mexico over the past decade has been negative at -0.6%, well below the OECD average. Mexico cannot become a wealthy country by simply increasing wages — to do so, it must find a way to increase both wages and productivity.
There are those who would argue that Mexico’s minimum wage is still so low that it should not make a difference to businesses, but that is just simply not true. If labor costs increase without productivity improvements, local companies will slow down or stop new investments. Multinational companies will consider investing in other countries where the wage-to-productivity relationship is more favorable. As we move to a world of increasing investment in AI and robotics, where will that leave the untrained/unskilled Mexican worker? I have previously written about this in a 3 part series on the need for Mexico to begin pivoting its economy to other areas here.
In many areas, the private sector is doing its part. Companies like Amazon, Microsoft, and Google have announced significant investments to improve cloud computing resources in the country. Just this week Amazon annouced that nearly 40% of Mexican companies are now using AI. That will be essential to help Mexico’s white collar workers stay competitive. Countless other companies are increasing their in-house training capabilities to upskill (and make more productive) their factory workforces as well.
That being said, Mexico’s public educational system continues to not do its part. Mexico ranks near the bottom of the OECD countries on both high school completion and college-level education. Only one-fifth of Mexican adults aged 25-64 have graduated from college, ranking it 43rd out of 47 countries with data. Out of countries where high school is the highest level of education, Mexico is a dismal 43th out of 46 countries for low attainment. In PISA exams, just 34% of 15 year old Mexican students attained at least level 2 proficiency in mathematics (compared with an OECD average of 69%). In reading, just 53% of Mexican students attained at least a level 2 proficiency compared to an OECD average of 74%. This ranks Mexico 34th out of 37 OECD countries in reading (a statistic that is motiving us to get MND Kids in Mexican schools as well!).
I applaud and celebrate the efforts of the private sector to upskill and train the Mexican workforce — in many cases, they are doing their part. I also appreciate the efforts by the federal government to bring better conditions to the workforce; higher minimum wages, better working conditions, shorter work weeks, more holiday and vacation time are all valid and important issues. The new levels being legislated are not unreasonable — this is not a France-type situation. That being said, if the government doesn’t start to make some significant progress on the public education side of the equation, Mexico is at a real and serious risk of continued economic stagnation that will ultimately result in less job creation, more unemployment, and a real missed opportunity. President Sheinbaum and her administration must make this issue a more urgent priority!
Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for nearly 30 years.
