The Jan. 1 increase coincides with hikes in salaries for low-paid workers in many U.S. cities and states, in response to mounting demands for a living wage. Maryland is boosting its minimum hourly wage from $10.10 to $11, Arizona’s wage is climbing from $11 to $12, and California’s is jumping from $12 to $13 for large employers.
If Mexico’s salary boost sounds impressive, though, the minimum wage will still be less than $1 an hour — not enough to lift many people out of poverty. The new wage is 123.22 pesos a day, or about $6.85.
And nearly 60 percent of Mexico’s workers aren’t even in the formal economy. They pick crops, sell food or clothing in street markets or do other work under the table.
Mexico’s paltry wages have been a source of deep concern to American unions, which fear jobs are being leached from U.S. communities and sent south of the border. Raising the minimum wage was among López Obrador’s commitments to Democratic lawmakers in the U.S. Congress who demanded concessions before approving a new trade deal.
But Mexico’s minimum wage has shriveled so much — its purchasing power dropped roughly 73 percent in four decades — that the government is playing catch-up.
“For Americans, this sounds crazy — 16 percent last year and 20 this year,” said Valeria Moy, an economics professor at the Autonomous Technical Institute of Mexico. “But you have to realize that for years, the minimum wage in Mexico grew less than inflation.”
In the past, governments tried to restrain the minimum wage because so many other prices were indexed to it: the cost of a passport, traffic fines and more. Officials worried that boosting the wage would set off a cascade of price increases, an unnerving possibility in a country ravaged by hyperinflation in the 1980s.
But many fees were decoupled from the minimum wage years ago. And despite concerns that the salary hike could trigger demands from other workers, Mexico’s economy was stable in 2019, if fairly lethargic. Inflation dipped, from an annual rate of 4.37 percent in January to 2.97 percent in November.
Now, López Obrador is betting that the economy can again absorb the pay increases. “We’re going to raise the minimum wage without hurting job creation, without affecting businesses,” the president told journalists.
The 2020 salary increase could directly benefit 3.4 million Mexicans, officials say. But it won’t necessarily lift people out of misery. The government calculates the poverty line to be around 12,000 pesos a month — roughly $667 — for a family of four.
And the increases are unlikely to change things for workers who can’t find jobs in Mexico’s informal economy or pass up openings because of dismal wages. They are people such as Camerina Salazar, 33, who works as a street artist, dressing up as a “Catrina,” a figure from Mexico’s Day of the Dead iconography who mocks the well-to-do.
She paints her face and wears a dress made from Doritos bags, while her 13-year-old son sports a suit styled from empty cigarette packs. Shoppers and tourists flooding Mexico City’s central Zocalo square over the holidays pose for pictures with the pair, paying a few pesos in tips.
“This is seasonal, and we’re doing well, so we’ve been able to pay some of the bills that we’d fallen behind on,” Salazar said, estimating that she, her son and her husband — who covers himself in black and gold paint and poses as a human statue for tips — earn about 800 pesos daily on weekends, around $44.
“It’s more than people make in a week at their jobs,” she said.
Aldo Muñoz, a labor expert at the Autonomous University of Mexico State, noted that the government’s tally of minimum-wage workers may be overstated. Many companies report only part of their employees’ salaries, to pay less in social security fees and other benefits, he said.
In such cases, an increase in the minimum wage “is not reflected in an improvement of people’s earnings,” he said.
Moy said that the wage hike was “good news” but that the government cannot keep raising salaries so fast.
“If you want to improve the conditions for workers, you have to do structural things that are harder,” she said. They include shifting people to the formal economy, requiring them to pay social security taxes, and upgrading education and training, she said.
López Obrador said he hoped the wage increase would have a ripple effect, translating into higher sales in stores. Economists say working-class Mexicans have continued to spend despite the country’s economic slowdown, in part because they are hopeful for better prospects under López Obrador.
Pablo Mejia, 25, hauled a toddler-size statue of St. Jude Thaddeus, patron saint of lost causes, through a street packed with Christmas shoppers one recent day. Many tossed him a coin — such is the saint’s appeal with the capital’s working class.
Mejia said donations have risen in recent months, something he credits to optimism about the new president. Mejia believes the minimum wage increase will also benefit his market stall, where he peddles T-shirts and sneakers.
“It helps all of us, because people buy more,” he said.
Not everyone is pleased by the hikes in bottom-rung wages, which emerged from an agreement between the government, labor unions and business organizations.
One of López Obrador’s first acts after taking office 13 months ago was to raise the minimum wage by 16 percent for most of the country, and by 100 percent in Mexico’s northern border region — to 176.20 pesos a day, then around $9.28. Many assembly workers in the city of Matamoros, opposite Brownsville, Tex., already earned more than the minimum. Thousands went on strike, demanding raises of 20 percent as well as big bonuses.
Abdio Lorenzo, who owns a business that recovers leftover metals from “maquiladoras,” or manufacturing plants, said the wage increase caused uncertainty as companies froze investment and hired less. Maquiladora activity in other parts of the border area — with less-militant unionism than Matamoros — has remained robust.
“What we see from the business point of view is a loss of jobs,” said Lorenzo, whose company halved its workforce to 16 employees.
On the plus side, his wife’s stationery store has recorded more sales over the past year. He attributed that to the upswing in the service and retail sectors, “due, in part, to the bonuses and salary increases.”