Here’s What Mexico’s Rising Minimum Wage Means for the Region

In a boon to workers in the region, Mexico is raising its minimum wage. In fact, “The country is boosting its minimum wage 20% starting Jan. 1, to 123.22 pesos per day, or $6.50. (The minimum is higher in northern border territories; there it rises 5%, to $9.75 a day),” according to The Los Angeles Times.

Notably, that increase is “seven times faster than inflation,” and it has already been raised by 16% earlier in 2019, according to the publication.

The move comes as President Andres Manuel Lopez Obrador aims to combat income inequality in the country. “The leftist government of President Andres Manuel Lopez Obrador is using the wage as a tool to fight poverty and inequality. This is a stark break from Mexico’s recent policies, when increases to the minimum salary barely topped inflation to help exporters to the U.S. keep costs down,” as noted by The Los Angeles Times.

Interestingly, the country’s minimum wage was one of the lowest out of many studied by the Organization for Economic Cooperation and Development before Lopez Obrador became president. However, the publication notes that economists remain split on what impact the wage boost could have on the country, including inflation. “We’re starting to see some effect of high minimum wage increases on inflation in the form of higher core inflation, and that will make the central bank more prudent,” said Ernesto Revilla, head of Latin America economics at Citigroup, in an interview with the publication.

In negative employment news, however, Mexico “created 30% fewer formal jobs through November compared to last year.” The news comes as Mexico’s economy is expected to see a rise in 2020 after “the U.S. House of Representatives approved the renegotiated North American trade deal following lengthy and at times contentious negotiations,” according to The Associated Press.

“Foreign Relations Secretary Marcelo Ebrard said the overwhelming vote for the deal, which was also passed by Mexico’s Senate last week, was ‘excellent news’ and will bring ‘jobs, investment and technological development’ to the country,” according to the publication.

Lopez Obrador, meanwhile, says that the boost in the country’s minimum wage will be greatly benefit in the coming months. “This is going to help the economy of course because it strengthens the internal market,” he said, according to Bloomberg. “If there’s more revenue, it helps reactivate the economy, there are more sales for merchants.”