Mexico moves closer to possible minimum wage hike

Worker carries mud used to make bricks at a brick factory in Tixtla, on the outskirts of Chilpancingo, in the Guerrero state
A worker carries mud used to make bricks at a brick factory in Tixtla, on the outskirts of Chilpancingo, in the Guerrero state, January 26, 2015. REUTERS/Jorge Dan Lopez

November 13, 2015

MEXICO CITY (Reuters) – A committee in Mexico’s lower house of Congress voted overwhelmingly in favor of a measure that moves Latin America’s No. 2 economy a step closer to increasing its low minimum wage, which has fallen in real terms over more than three decades.

The measure, which would decouple the minimum wage from how some fines, levies and contributions are calculated, is part of President Enrique Pena Nieto’s bid to boost economic growth and the purchasing power of low-income Mexicans.

The current daily minimum wage in Mexico is 70.10 pesos ($4.19), placing it below most of its peers in Latin America and dead last among the 34-country Organization for Economic Cooperation and Development.

The minimum wage is now used as a benchmark for a host of other prices, including fines, worker contributions for subsidized home loans and public financing for political parties, meaning any measures to raise it would have repercussions far beyond labor markets.

A committee in the Chamber of Deputies voted 22 to 1 to separate the minimum wage from being a reference for other prices, gaining the support of parties across the political spectrum.

The legislation “seeks to reverse the distortion … (of) this number by treating it as a reference for market value and not as a constitutional right in favor of workers,” according to a statement.

The strong favorable vote in the committee suggests it should pass the full chamber.

But any future minimum wage increase would also require approval of an independent commission, which has so far resisted increasing wages by more than a few pesos a year on average.

Mexican policymakers have long favored lower wage increases to keep inflation in check and lure foreign investment. Cheap labor has attracted a spate of new auto factories from the United States and Japan.

But inflation has fallen to record lows, and economists warn continued low wages could drag down consumption.

While only about 13.7 percent of Mexican workers earn the minimum wage or less, the average wage is still 294.5 Mexican pesos a day, according to latest data from the national statistics office.

(Reporting by Anna Yukhananov; Editing by Shri Navaratnam)