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Mexico’s Job Growth Slows Dramatically, as Minimum Wage Rises

Businesses in Mexico seem to have been frightened by the rising minimum wage, with the latest reports suggesting that the country lost as many as 382,210 jobs in December last year alone.

According to the country’s social security institute, known as IMSS, barely 342,000 net jobs were created in 2019, the slowest job growth since the country underwent a financial crisis a decade ago.

The news comes a week barely after reports emerged that the members of Mexico’s central bank had expressed concern at the government’s decision to increase the minimum wage.

President Andres Manuel Lopez Obrador (AMLO) seems to believe that the pay rise will boost consumption and the economy as a result. He is increasing the minimum wage year after year.

Last month, AMLO’s administration raised the daily minimum wage by 20%, the most significant wage hike in the last four and a half decades. This came a year after he increased the minimum wage by 16%.

Some reports say employers fired their staff in December to avoid paying a holiday bonus and that they might re-hire them in the new year.

With the economy stagnating, businesses are apparently finding it difficult to comply with a pay rise and stringent labor laws.

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The central bank is worried that the wage hike could stoke inflation, which is inching up to 3% in recent months. Mexico needs low interest as it is struggling to climb out of recession.

Analysts say that the rising cost of employment may also hurt the country’s export sector.

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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