AMLO Laying Foundations for Minimum Wage Hike in Mexico

Mexico’s President-elect, Andres Manuel Lopez Obrador (AMLO), and his team have started laying the groundwork to gradually raise the country’s minimum wage.

Luisa Maria Alcalde Lujan, the nominee to become the country’s next Labor Secretary, recently met with representatives from the Bank of Mexico with a proposal to raise the minimum wage from 88 pesos (US$4.7) per day to 171 pesos (US$9) by the end of 2024, according to Mexican daily Excelsior.

Mexico’s minimum wage is less than a third of Chile’s, less than Colombia’s, and less than half of Brazil’s. However, lower wages have been one of the main advantages for the country in attracting foreign investment.

Lower wages have already become a flashpoint in the ongoing negotiations over the North American Free Trade Agreement (NAFTA), with the United States repeatedly urging Mexico to double wages for workers in the automotive industry. Lower wages, the US has argued, are tempting American automakers to shift their manufacturing plants to Mexico.

However, raising minimum wages is easier said than done for AMLO’s new administration. NAFTA has already boosted wages and the overall living standard in Mexico. Further increase in wages may stoke inflation and hurt businesses dearly, say economists.

Each time Mexico has tried to boost salaries beyond the usual yearly hike the central bank has urged caution to prevent inflation from accelerating. In addition, wages in Mexico vary from state to state. Therefore, analysts say the country will need to even out the wages across the whole territory.