Bloomberg | Juan Pablo Spinetto, Nacha Cattan, Eric Martin.
Economists debating the impact of a minimum wage on inequality, inflation and the jobless rate are about to get a ton of new evidence from Mexico.
The country is boosting its minimum wage 20% next year, an increase seven times faster than inflation, on top of a 16% jump this year.
The leftist government of President Andres Manuel Lopez Obrador is using the wage as a tool to fight poverty and inequality. This is a stark break from Mexico’s recent policies, when increases to the minimum salary barely topped inflation to help exporters to the U.S. keep costs down.
Before Lopez Obrador took office, Mexico’s minimum wage was the second-lowest among more than 30 countries in a study by the Organisation for Economic Co-Operation and Development as a proportion of what an average worker made. Only the U.S. was lower.
Mexico’s minimum wage is soaring so rapidly that it now will cover a much larger number of workers, amplifying its impact.
This year’s minimum wage hike only boosted about 1% of salaries in the formal economy. Next year, that figure may reach 10%, as more workers are earning less than the new income floor of 123.22 pesos per day, according to Jose Luis de la Cruz, director of the Industrial Development and Economic Growth Institute in Mexico City.
“The positive impacts, as well as the challenges for inflation and for companies, will be greater,” he said. Read more at: https://www.bloombergquint.com/global-economics/mexico-is-about-to-find-out-if-minimum-wage-raises-kill-jobs