Mexico Passes Legislation to Match Minimum Wage to Inflation

The Mexican Senate has unanimously approved a constitutional reform that would guarantee annual increases to the country’s minimum wage, ensuring it keeps pace with inflation.

While the decision is a significant step, it must still be ratified by the local congresses of all 32 Mexican states.

The reform aims to prevent the erosion of workers’ purchasing power, particularly for the approximately 40% of Mexicans who earn minimum wage or less.

Mexico’s minimum wage has seen a substantial increase of 142% since May 2019, according to the OECD. However, after accounting for inflation, the real increase stands at 86.6%.

President Claudia Sheinbaum has pledged to continue the policy of annual wage increases, targeting approximately 12% per year.

One of her primary objectives is to raise the minimum wage to cover the cost of 2.5 “basic food baskets,” a standardized measure of essential goods.

Currently, the minimum wage only covers about 1.6 baskets, indicating a significant gap between wages and the cost of living.

While raising wages is generally seen as a positive step, reducing wages to adjust for inflation can be politically challenging. Mexico’s labor unions often advocate for wage increases but may oppose cuts, whatever is the rate of inflation.