Mexico to Raise Minimum Wage Above Inflation

By Anthony Harrup Features Dow Jones Newswires

Mexico's minimum wage commission decided Tuesday on an above-inflation increase in the country's minimum wage in a continued effort to restore lost purchasing power among the country's lowest-paid workers.

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The commission, formed by representatives of organized labor, business and government, will add five pesos to the daily minimum wage as of Dec. 1 from the current 80 pesos ($4.26), and pile a 3.9% increase on top of that, bringing the wage to 88.36 pesos. The annual wage rise usually takes effect in January.

President Enrique Peña Nieto announced the increase at an event in which he noted Mexico has created more than 3.3 million formal private-sector jobs since he took office in December 2012, including more than 1 million in the first 10 months of this year.

"This isn't a minor adjustment, because at the start of this administration, practically five years ago, the minimum wage was 60 pesos per day," Mr. Peña Nieto said. In the past five years, the minimum wage has recovered 20% of its purchasing power in real terms, something that hadn't happened in more than 30 years, he added.

Solid job creation in recent years has contributed to rising domestic consumption, which has been the main engine of economic growth in Mexico. The national unemployment rate was 3.3% in the third quarter, returning to levels not seen since before the 2008-09 global financial crisis.

Despite the record number of jobs created, Mexican wages remain low and have been an issue in discussions on labor during talks to renegotiate the North American Free Trade Agreement. A fifth round of talks among the U.S., Mexico and Canada was wrapping up Tuesday in Mexico City.

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After several decades of raising the minimum wage roughly in line with inflation, the wage commission last year agreed to an increase of about 10%, well above the 3.4% inflation rate and a first step toward speeding up recovery of a wage that has long been insufficient to cover basic needs.

Inflation accelerated this year to 6.4% in October, largely because of the depreciation of the Mexican peso and January's jump in gasoline prices, but it is widely expected to ease again in 2018.

The Mexican employers' confederation, which represents business, said Tuesday it sought an increase in the minimum daily wage to 95.24 pesos to reach the level that the government commission in charge of evaluating anti-poverty programs considers the least amount required to meet basic needs.

The confederation said the commission agreed to raise the wage again by April 30 at the latest to reach that level.

Around 15% of the country's 52 million workers make minimum wage, according to government data. Most of them are employed informally, and many households survive because they have several wage earners. Around 57% of workers are employed in the informal economy or under informal conditions, without contracts or benefits.

The average daily wage in the formal sector is around 333 pesos, according to Labor Ministry data.

The Bank of Mexico said earlier in November that minimum wage increases above gains in productivity could have an inflationary impact in 2018, although so far it hasn't detected significant wage pressures on inflation.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

November 21, 2017 16:16 ET (21:16 GMT)