Minimum wage in Mexico

Minimum wages are interventions of the labor market that governments use as political macroeconomy instruments or as social tools. In other words, they represent the lowest wage level established with a fixed system of minimum gross wage that workers receive in virtue of a labor contract.

In 2021, Mexico has had significant changes in the labor area and its pay -currently its minimum wage- is found at $141.7 MXN according to the National Minimum Salary Commission (Comisión Nacional de Salarios Mínimos (CONASAMI)).

Minimum wage in Mexico

Why is this country attractive for foreign enterprises?

Mexico’s economy has been developing constantly in the last years, and competent governmental reforms guarantee a constant increase in the population life level in this country. If 20 years ago half of the population lacked funds for food, now in terms of development Mexico’s economy occupies 15th place in the world, according to the 2021 ranking made for the previous year. However, life in this country is not costly. Living in Mexico is much cheaper compared with other countries, which is why many foreigners visit the country or even search for investment here.

BLACKROCK – the largest investor institution in the world – in an interview made to its Director General in Mexico, Samantha Ricciardi mentioned that this country has great growth potential in the medium and long term, and speaking of Latin America, Mexico is placed as number one for investment. This situation is due to multiple factors that make a country stand out, one of them is the minimum wage it has.

In another interview, Laurence D. Fink, President of the Board of Directors and Director General of BlackRock, pointed out that the companies are focusing on Mexico’s location because it has very important educational and technological bases, which make it a very attractive country for enterprises. Likewise, he mentioned that cheap labor and being close to the United States make Mexico a great destination for investment.

“Mexico has something unique that other countries do not have. It is in my mind a place where natural resources can be used for a long time, which has to be exploited because it is an industry. As well as for manufacturing, most of the manufacturing companies are in China and México can change this situation through investment made in the country” , he clarified.

Advantages of minimum wage

The demonstrated advantages of minimum wages include better efficiency of workers and greater productivity. In general terms, some higher minimum wages could have a positive impact on the workers’ acquisition power, with which their expenses increase as aggregate demand and economic growth are stimulated. Another advantage is that incentives are provided. Through its online publication, Observer, the Organization for Economic Cooperation and Development (OECD) reported that a minimum wage offers an incentive for non-qualified and unemployed workers when they find a job.

Poverty is a load for the national economy in the measure that governments are forced to assist those who do not find work. A minimum wage ensures that low-qualified workers are guaranteed to be paid, which encourages them to find work and be able to provide for themselves. Additionally, labor security is offered since, during a weak economy, workers with minimum wage are benefited because they tend to be in the low part of the payment scale, according to Lisa Scherzer in the article SmartMoney: “Winners and Losers of the Minimum Wage Hike”. Part-time workers that get a minimum wage may have the opportunity of full-time work to help save the employer the cost of hiring and training new employees. Low salaries in Mexico are a competitive mechanism to promote exports. Mexico has been in charge of opening its market and putting workforce (low cost) as its main attraction for investments to arrive in the country.

How is minimum wage calculated in Mexico?

The National Commission of Minimum Wage (CONASAMI) is the organism in charge of setting the legal minimum wages in Mexico.

To establish the minimum wage of the following year, several daily life and economic aspects are analyzed to conclude how much money a worker needs to “live with dignity” in function of the cost of living and inflation caused by a price increase.

How has the minimum wage increased in Mexico?

Each year, the Representative Council of the National Commission of Minimum Wages agrees with a new value for the minimum wage in Mexico. In December 2014, a new classification of minimum wages was established in two geographical zones.

Therefore, each year the minimum wage increases as the cost of living increases, which for workers means the inflation that the country has. Thus, it should be sufficient to satisfy the normal needs of the workers, education and honest enjoyment, considering them as the head of the family.

The following chart shows the evolution of the minimum wage (MXN) in Mexico in the last 10 years:

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