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Mexico approved the highest rise in the minimum wage in the last 25 years.

December 27, 2018

The Mexican government announced Monday the biggest increase in the minimum wage in 25 years. Workers’ compensation will rise from 88.36 pesos per day (4.39 dollars) to 102.68 pesos (5.11 dollars) throughout the country. The increase of 16.21% will come into force as of January 1, 2019. In addition, the creation of a wage economic zone will begin on the northern border where the minimum wage will be 176.72 pesos (8.79 dollars) in the first 25 kilometers from the fence with the United States. The administration of the president, Andrés Manuel López Obrador, has met with employers and unions to get the agreement. “It is an act of political maturity, of responsibility, of conciliation, of agreement, an act that we can trust to continue to improve the economic, labor and social conditions of our country,” the Mexican president said during the announcement.

The rise in the minimum wage in Mexico had historically been below the welfare line, without the workers having the possibility of spending on the minimum necessary to subsist. “It will help the economy a lot and we will benefit everyone, because when there is more income, the internal market is strengthened,” López Obrador explained. The Mexican government has recognized that the purchasing power of the minimum wage has fallen by 70% since 1976, which has led to the precariousness of work and increased informality, with 57% of the economically active population in it. population is the one that works the most hours a day and at the same time is the one with the least income. In Mexico, the minimum wage is not enough for the minimum, “said the secretary of Labor, Luisa María Alcalde.

The Government of Mexico has guaranteed that the increase will have no effect on inflation next year and has committed to review the conditions of Income Tax (ISR). The businessmen have also asked the president to rectify the tax conditions for small and medium enterprises. “We take a decisive step so that formal employment means economic security and dignified capacity for the future,” said the president of the Business Coordinating Council (CCE), Juan Pablo Castañón. The Coparmex, the employer association that promoted the initiative since last year, has also supported the petition and has recognized the urgency of the increase in a country with 44% of the population immersed in poverty. “The new salary allows the worker to satisfy their basic food and non-food needs in urban and rural areas, granting that they have essential consumption capacity,” the employer said in a statement.

López Obrador’s plans for the border are crystallizing with the doubling of the minimum wage in the region. There, a large part of the maquiladora factories that supply the United States are concentrated, and since the 1990s it has suffered the impoverishment of its population. “It is the last curtain of development to retain our compatriots in the territory. The first curtain starts in the south. We are going to develop different curtains so that people do not have to emigrate, migration will be optional, “the Mexican president mentioned. In addition, he announced that on Tuesday Foreign Secretary Marcelo Ebrard will explain the plan that Mexico and the United States have negotiated to contain the migration crisis in the region.

The Mexican Government’s estimate is that the 100% increase in the minimum wage at the border is offset by the reduction of the Value Added Tax (VAT) from 16% to 8%, and the revision of the ISR that could go from 30% to twenty%. López Obrador has committed to make the fiscal adjustment before the beginning of 2019. The Ministry of Finance and Public Credit (SHCP) has acknowledged that the president could publish a decree in the coming days to reduce taxes in the cities that border the 3,169 kilometers of border. The increase for salaries is also tied to the perspective that both the United States and Canada had demanded from Mexico during the negotiation of the trilateral treaty, the TMEC.