Hike in Minimum Wages

The government of Mexico has joined with the country’s major business leaders to raise the minimum wage of the country to 88.36 pesos. The new wage will come into play from December 1.

While the news has been welcomed by Mexico, it has not raised joyous cries across the border. Although the 10% raise will be life changing for the 24.7 million Mexicans who do minimum wage jobs, it will result in greater losses for the companies that hire them.

Key complaints have also been raised by American workers who voted for President Trump on the basis of his NAFTA pledge.

During his campaign, the U.S. President stated that he would renegotiate NAFTA, the trade pact made between the U.S., Canada, and Mexico. At the time Trump stayed true to his philosophy of “America First” and openly blamed NAFTA for the loss of American jobs.

In the past, the allure of cheap labor has attracted a number of American-based companies to Mexico. According to statistics published by the Economic Policy Institute, since NAFTA became law in 1994, nearly 800,000 U.S. jobs were lost to cheap labor in Mexico between 1997 and 2013.

Since the U.S. held its minimum wage at $7.25 per hour, companies automatically opted to take their workload to the cheaper workforce across the border.

This is one of the core reasons that Mexico boasts one of the lowest unemployment rates in the world, only 3.6%.

Although the move has hurt companies that desire cheap labor, it has done more good than harm.

Mexico has long been a struggling economy, and for close to two years the Mexican peso has been at an all-time low. A Mexican peso is currently the equivalent of five cents. A dollar on the other hands is worth close to 20 pesos since 2016.

Thus, Mexicans have had a difficult time adjusting to the global market.

While the small hike in wages is unlikely to cause a large difference in the country’s earnings, it is a small step to a better future.