President Andres Manuel Lopez Obrador (AMLO) gives Mexican working families a Christmas gift this Monday by announcing a second increase to the minimum wage of 20 percent, Mexico’s largest in more than 40 years. It will benefit 3.44 million workers and will increase their purchasing power by 30 percent.
Back in the 70s, Mexico had the highest wages in all Latin America but after the neoliberal economic model, and with its blowback corruption, wages in Mexico became the lowest in the world, even lower than those in China.
The salary purchasing power dropped 70% in the last two decades in Mexico costing social and economic unrest to 60% of the population.
👨🔧👷♀️ La Nueva Política Salarial permitió que en 2019 el #SalarioMínimo tuviera su mayor incremento en los últimos 36 años, lo que no provocó inflación, logró que millones de trabajadores salieran de la pobreza laboral y que la brecha salarial por género disminuyera. pic.twitter.com/MHYGfzt3UM
On Monday night, AMLO announced a second and historic increase of 20% to the minimum salary with a plan supported by the private sector to bring the Mexican salary back to its normal levels, hence improving the standard of living of millions of Mexican families.
“What a great Christmas gift was this announcement. I’m so glad I voted for AMLO.” Said Cristina on twitter.
On December 1st when AMLO began his presidency, daily salaries were set to increase from the average of 88.36 pesos (US$4.40) to 102.68 pesos (US$5.11) on Jan. 1, 2019. The first increase was 8% nationwide, and doubled at the border at the beginning of this year.
Next year, Mexico’s Labor Department said the minimum wage will be 123.22 pesos a day starting January 1, 2020, or about $6.51 U.S. dollars at current exchange rates. That is a boost from the 120.68 pesos (US$6.38) minimum wage.
Likewise, at Mexico’s northern border where the minimum wage doubled at the beginning of this year, by January 2020 it will go from 176.72 to 185.56 pesos per day, which represents 5,641 pesos (US$298.20) per month.
It is important to highlight that the second increase was possible thanks to the first increase implemented at the beginning of this year, which the quantitative data now shows that it’s a fallacy to say that increasing salaries will cause inflation.
En 13 meses logramos consenso entre los representantes obreros y empresariales para aumentar el salario mínimo como no sucedía en cuatro décadas: 16% en 2019 y el doble en la frontera, y 20% para 2020. Es decir, habremos recuperado más del 30% del poder adquisitivo del salario. pic.twitter.com/4DRIwFQpRS
In 13 months we reached consensus among the workers and business representatives to increase the minimum wage as it did not happen in four decades: 16% in 2019 and double at the border, and 20% by 2020. That is, we will have recovered more than 30% of the purchasing power of salary. Said AMLO
As of September of 2018, of the country’s 45 million who earn a monthly salary, about 8.5 million earn minimum wage, according to the National Institute of Statistics and Geography (INEGI).
AMLO said this agreement was a sign of political maturity for Mexico in that the wage agreement was negotiated with leaders of all sectors.
The secretary of labor said that during the neoliberal period, Mexico was made to be competitive through offering the world’s cheapest labor imposed by the economic growth model. She said that model proved to be a failure and was at the expense of workers’ incomes.
She also stressed that the new labor policy is aimed at making Mexico a more attractive economy for investments but no longer in detrimental to the people’s well-being.
The new model of labor relations is in tune with the historical labor reform based on freedom of association and the authentic collective hiring of a new system.
The secretary of labor explained that the argument that increasing the minimum wage would generate inflation and therefore an economic chaos, is a falsehood argument that has collapsed in many countries of the world.
This year, after the first minimum wage policy increase, the inflation not only didn’t skyrocketed in Mexico, but it has been among the lowest in the last four years. “This has broken the myth that was used to justified the stagnation and the loss of the purchasing power of workers.” She says,
The greatest proof that the increase in the minimum wage had no inflationary effects is that in the main cities of the free zone on the northern border, where the minimum wage was doubled, it showed lower inflation rates.
It also didn’t have any negative effects on formal employment.
Important impact 2019 data presented in the minimum wage policy.
During 2019, 724.000 new formal jobs have been generated in Mexico.
An impact on the average salary of the workers enrolled in the Mexican Social Security Institute where it increased 4.6% and 8.5% on the border.
The higher benefit was for the 10% of workers who earn less income with an increase of 72% for those in the free zone on the northern border, and 8.5% in the rest of the country
1.3 million Mexicans were taken out of labor poverty.
Reduction on the salary gap between men and women by almost 3.2% This is because a greater number of women than men receive the minimum salary.
The purchasing power increased by 30%.
Not only workers benefit, but business of all sizes as well with sales increase.
It positively impacted retail sales with an increasing by 4.6% in the first nine months of this year.
Self-service and department stores reported total sales in November increased by 10%, according to the National Association of Self-Service and Department Stores.
The new minimum wage will continue to increase above the inflation rate in 2021.