The increase to the minimum wage is a mirage, a blow to SMEs and an increased boost for informality

Note published on December 9 in El Sol de México, Análisis [Analysis] Section by Alberto Aguilar.
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After the signature of the USMCA, the government of Andrés Manuel López Obrador took note of the rejection by the US and Canada of the low salary levels in Mexico, Thus, as part of the labor reforms made by the STPS [Department of Labor and Social Welfare], headed by Luisa María Alcalde, there  has been an increase to the minimum wage.

Actions had to be taken to reduce “salary dumping”, but this matter is also part of the government’s strategy for improving purchasing power. The CCE [Business Coordinating Council], headed by Francisco Cervantes was left with no choice but to agree. In 2023, the increase will be of 20%.

Even though the INEGI [National Institute of Statistics and Geography] estimates that 18.8 million workers earn the minimum wage, the truth is that in the database of the IMSS [Mexican Social Security Institute], only 47,284 employees are registered at that level.

There is certainly some distortion. Many employers register their employees at a higher level in order to avoid audits. And, anyway, the bulk of those who earn the minimum wage have informal jobs, explains Héctor Márquez president of the  AMECH [Mexican Association of Human Capital Companies].

Upon the increase of the minimum wage a “lighthouse effect” is triggered, that is, the pressure to equate perceptions in other levels:  Márquez adds that contractual revisions are coming in March, and they are expected to be of around 9%.

The problem of increasing the wages out of synchronicity with productivity is that more inflation will be generated, predicts labor expert Oscar de la Vega. Additionally, this comes at the worst possible time for companies: the number of vacation days has also been increased and the increase in the amount for pension contributions starts in January.

De la Vega points out that large corporations will not have a problem. Their salary tabulator and their rest policy are higher. The blow will be felt by the SMEs, which are 90% of the productive plant. Consequently, informality will be encouraged. As it was, these companies were the ones most affected by the pandemic.

As of October, 21.6 million workers were registered with the IMSS vs. 31.6 million informal workers. In this sense, in truth, the wage increase will be a mirage for many, many Mexicans who work for lower wages.

So, rhetoric vs. reality.


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