How many people earn the minimum wage in Mexico?

The most recent increase in the minimum wage is good news. As of January of next year, workers who earn their income based on minimum wages will see a 20% increase in their earnings. On the northern border, the minimum wage will go from 260.34 pesos to 312 pesos per day, an increase of 1,584 pesos per month. In the rest of the country, the increase will be 1,052 pesos per month, reaching 207 pesos per day.

The increase in recent years is relevant. The minimum wage in 2018 was 88.40 pesos. With the increase announced in recent days, the nominal increase in wages has been, since 2018, 253.6% for the border zone and 134.30% for the rest of the country. The real increase, that is, after already removing inflation, which has been particularly high this year, is 190% for the border and 93% for the rest of the country (with the most recent data). There is nothing to be contested about this measure, but it is important to understand its implications and, above all, its limits.

Let's start with perhaps the most obvious doubt: how many people earn the minimum wage? The Secretary of Labor, Luisa Maria Alcalde, stated that the measure would benefit 6.4 million workers. The available data is not very clear. On the one hand, we have the IMSS record of formal employment. Of the more than 21 million workers registered with Social Security, only 47,284 reported earning up to the minimum wage in October of this year. By salary ranges, the majority of the population employed in the formal sector reported earning between one and two minimum wages, or approximately 12 million workers.

These data, despite being administrative records, also do not accurately reflect reality because a common practice among employers is to register workers with a lower salary than the one they receive, paying them other types of compensation. Also, even though IMSS records show income in minimum wage ranges, that doesn't mean that the labor contracts themselves are based on that unit. If the minimum wage goes up, that doesn't mean that the contracts will change in the same way.

On the other hand, we have the ENOE, which reports that 18.3 million workers—formal and informal—earn up to the minimum wage. With more specific data from the same survey, we know that 4.2 million people report earning up to the minimum wage and also report having labor benefits. The enormous difference between the administrative records of the IMSS and the ENOE may be due to people affiliated with other types of social security, such as the ISSSTE, or maybe a reflection of the survey's own underreporting of income.

When we talk about the great achievement of increasing the minimum wage in these proportions, perhaps we are overcome by enthusiasm and forget that the greater part of the increase is because it has increased in the last few years.

By Valeria Moy, Source: IMCO