Mexico And NAFTA

The minimum wage in Mexico doesn’t cover a family’s basic needs.
The minimum wage in Mexico doesn’t cover a family’s basic needs.

The debate on increasing minimum wage has been gaining momentum around the world in the recent years. In developing economies such as Chile and Brazil, for example, high inequality and low standards of living have led to wage recovery policies, while four states in the wealthy United States recently raised the minimum wage, in some cases to US$15 an hour.

Did the impact of economist Thomas Picketty’s best-selling book Capital in the 21st Century cause this? Or perhaps it’s international migration and political polarisation. Either way, the notion that workers deserve a “living wage” is now a global trend.

Mexico is no exception. In 2016, the national minimum wage was increased 4.2% to 73 pesos a day (less than US$4). Even so, it is insufficient to buy what we economists call the “basic basket of goods” for one person – such as beans, tortillas, eggs and a bit of meat – much less to support even a small family.

Now public debate in Mexico is reaching a critical volume, with social organisations, academics, business leaders and political circles arguing that the dismally low minimum wage condemns workers to poverty.

‘Honest pleasures’

Mexico was among the first countries in the world to establish a national minimum wage, thanks to the Mexican Revolution and previous hyperinflation.

Our 1917 Constitution (article 123), dictates:

The minimum wage that a labourer should enjoy shall be sufficient, considering the conditions of every region, to satisfy the normal necessities of the worker’s life, his education and honest pleasures, as head of a family.

From then until 2000, when the ruling PRI party lost the presidential palace for the first time in 70 years, the minimum wage was used as an economic policy instrument. From the 1930s to 1960s, Mexico established a relatively low minimum wage of 24 pesos (US$2 per day in 1969 terms) to keep labour costs low, attracting investment. But in that period wages increased more than inflation, transferring some of the business sector’s productivity gains to workers’ salaries (as opposed to increasing only as profits).

[Read It All…And What Follows]

See Also:

(1) The U.S.-Mexico Wage Gap Is Actually Widening Under Nafta

(2) The Secret Life of the Mexican Worker and wages in Mexico

(3) Barrios Gómez: Mexico’s cooperation with U.S. could soon be at risk

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