Companies sourcing in Mexico will very soon be facing labor costs that are 10 percent higher.
Mexico is making moves to improve conditions for its low-wage workers, starting with a general minimum wage increase to 88.36 pesos ($4.73) per day, from the current 80.04 pesos ($4.28). The increase—which is above the country’s current inflation rate of around 6.4%—will take effect Dec. 1.
The Mexican Employers Federation, or Coparmex, had been calling for a higher 95.24 pesos per day to reach what it considers a level of well-being, but fears of stimulating inflation may have tempered the increase.
In a Coparmex statement translated from Spanish, the federation said the new rate covers just 92.76% of what’s needed to meet the welfare line. As such, they called the wage increase “halfway progress.”
Mexico’s president Enrique Peña Nieto, however, sees the raise as more progress than that.
“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,” The Wall Street Journal reported Nieto as saying at an event where he announced the wage increase.
Mexico’s still low wage has been a topic of concern during the North American Free Trade Agreement negotiations, which just wrapped a round in Mexico City that didn’t go entirely well.
[Read more on NAFTA renegotiations: NAFTA Prospects Grow Increasingly Grim as US Blames Canada, Mexico for Holding up the Deal]
Negotiators on the U.S. and Canada side reportedly see Mexico’s wage rate as unfair competition, when in the U.S. at least, wages for similar work just across the border can be as much as five times higher.
Mexico will close that gap just slightly more in April, as Coparmex said Mexico’s wage commission has agreed to increase the wage again at that time to at least reach 100 percent of what’s necessary to meet the welfare line.
“The challenge for Mexico is the orderly evolution of its labor market for the reduction of inequality,” the translated Coparmex statement noted.