MEXICO CITY - Mexico will raise the minimum wage by 20% next year, as employers, labor representatives and government reach an agreement, officials said on Thursday. However, some critics warned that the move could fuel inflation.
Labor Minister Luisa Maria Alcalde said at a regular news conference with President Andres Manuel Lopez Obrador that the minimum wage will rise to around 207 pesos $10.82 a day from 172.87 pes $9.03 a day.
Workers along the U.S.-Mexico border will see wages rise to 312 pesos a day from 260 pes a day.
The hike follows double-digit-percent increases by Lopez Obrador's administration every year since he took office at the end of 2018 in order to curb Mexico's vast income disparity.
Lopez Obrador told reporters that they played down inflation concerns because the latest minimum wage increase was calculated taking inflation into account, particularly price increases for basic goods.
He said that we don't see any risk of inflation shooting up.
Mexico is struggling to bring down high inflation, and the Bank of Mexico has increased its key interest rate by 600 basis points since mid- 2021 to 10.0% in an effort to tame price pressures.
The central bank board member Jonathan Heath said the bank's biggest concern was the core price index, which continued to trend up to 8.66%.
Gabriela Siller, economist at Banco BASE, pointed out three reasons why she believes that the planned wage increase will pressure inflation further, even if a salary hike is already baked into inflation forecasts.
One, this is a very sharp increase, two, it's not accompanied by gains in productivity, and three, we've had several years running with strong minimum wage increases, Siller said.
Luis Munguia, head of the National Minimum Wage Commission in Mexico, said that prices are expected to stay virtually unaffected because labor costs are already low in Mexico.
He said that we still have a margin.
He said that some 6.4 million workers will benefit from the increase, or about one-third of Mexico's formal workforce, more than in previous years. Munguia said he expected consumption to rise after the hike, as it has in recent years.
Salaries in Mexico are far below U.S. levels, where the federal minimum wage is $7.25 an hour.