Nearshore Americas

Mexico Proposes an Increase in the Minimum Wage

The Mexican government has tabled a bill in Congress to increase the minimum wage for employees struggling to keep pace with rising inflation. The measure is part of a broader plan to raise purchasing power and eventually stimulate the economy, which appears to be stagnating despite a slew of recent reforms.

Low wages are considered one of the main factors behind the widening economic inequality in the country of 118 million people.

Today the minimum wage in Mexico is equivalent to US$5 a day. However, it is unclear what wage the government has proposed.

According to Reuters, the measure would decouple the minimum wage from how fines and some levies are calculated.

Reports say wage difference between senior and junior employees is also a matter of concern. Some executives in top business firms are earning 100 times more than most of their subordinates.

A 2013 study by global management consultancy Hay Group says the wage gap is the most worrisome factor of the Mexican economy.

“The base salary of an executive in Mexico City is $10,000 a month, just $417 less than what an executive in a similar company in New York earns,” says Inter-Press Services.

Though more than 50 million Mexican have been employed in various sectors, less than 10% of the workforce is earning more than the minimum wage.

Mexico’s official unemployment rate stands at 4.8%. While increasing minimum wage is likely to expand the middle class in the country to some extent, it would not necessarily impact the nation’s vast informal workforce.

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Increasing in minimum wage could stoke inflation but analysts say Mexico can easily afford a slight rise in inflation, which today stands at 4.4%.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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