17 | FEB | 2019
Minimum wage is below the poverty line - Photo : El Gráfico/Jorge Medina.
Minimum wage is below the poverty line - Photo : El Gráfico/Jorge Medina.

Minimum wage: a historical debt

09/07/2018
10:04
Mexico City
Newspaper Leader
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AMLO proposes an annual increase to the minimum wage, hopes to lower poverty

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One of the country's historical debts is the one meant to compensate the purchasing power of the minimum wage. Although the people who receive this are becoming less and less, during the first trimester of 2018 there were 8.6 million people whose only income was this. For decades, its depreciation has been a continuous phenomenon, due to the economic crisis the different governments have gone through.

For a long time, it was argued that a rise higher than inflation was impossible because it would trigger rises in other areas since several concepts such as fines and public rates are calculated in “minimum wages”. The changes made to the law freed the income from that fee and “independent recovery fees” began to be applied, which pretends to revert the backwardness.

Now, the virtual President-elect, Andrés Manuel López Obrador proposed a 15% annual increase to the minimum wage, in order to comply a constitutional order that dictates to “satisfy the everyday necessities of the head of the family, in the material order, socially and culturally, and to provide compulsory education to their children”. Currently, the minimum wage is $88 pesos, which is under the personal well-being index indicated by the Coneval, an organism in charge of evaluating social policies and measure the poverty index.

Inside the business sector, there's an important group that advocates the minimum wage increase and denies inflationary effects. Experts also argue that when Mexico had salaries with a higher purchasing power, inflation didn’t rise.

The next government's economic project indicates that besides lowering poverty and inequality, a higher income would increase consumption in the medium and long-term.

Nevertheless, that measure could be inadequate if it doesn't go hand in hand with other actions to reduce informality, because according to the INEGI only 9% of those who earn up to a minimum wage are employed by the formal economy sector.

A salary rise above annual inflation, the result of a consensual decision between the government and the business owners, would be a relief for millions of families, but increasing the minimum wage without analyzing the pros and cons could damage small and medium businesses, as well as stop the job creation.

Mexico is an unequal country, where the income difference between upper-level bureaucrats and the less privileged is abysmal. What the Secretary of State earns in a month is what a worker will earn after five years of work.

Equalizing the minimum wage with the minimum established by the well-being index would be a small step, but a good start. 

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