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October 11, 2024
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Minimum wage reform will be insufficient to improve workers’ income

Minimum wage reform will be insufficient to improve workers' income

On October 9, the Senate approved, in general and in particular, the reform to article 123 of the Constitution to order that general and professional minimum salaries do not increase below inflation. This reform is one of the 20 that Andrés Manuel López Obrador presented as president.

With this approval, the reform goes to local congresses for discussion and approval. At least 17 states must endorse it for the Executive Branch to publish it in the Official Gazette of the Federation.

“Article 123 is obsolete and talks about working conditions from when it was drafted. Currently the club of employees is decreasing,” said Iván Franco, founder of the consulting firm Triplethree International.

“We must carry out a labor reform that has to do with all workers, not just those who earn the minimum wage,” he added, referring to the fact that there is more and more informal employment in the country.

During the last six-year term, the increase in the minimum wage was 110% nominal, however, despite said increase it was not enough to stop the loss of purchasing power, that is, the money was enough to buy less, he regretted for his part Eréndira Yaretni Mendoza Meza, specialist in economic matters, development and internationalization.

Productivity, the key

For the increases to have the desired effect: to recover the purchasing power of the currency and a better quality of life for workers, an increase in productivity must be achieved.

Productivity is important in Mexico, a medium-growth country, because economic growth can only occur by using the resources available more efficiently, Mexico explained. How are we doing? On their website.

In the second quarter of the year, productivity was 0.2% and 0.8% at an annual rate. While the goal is to grow at a rate of 4.8% annually, he added.

According to Salvador Rotter Aubanel, spokesperson for the Tax Research Development Commission of the College of Public Accountants of Mexico (CPPM), “it would have to be accompanied by some reform that encourages worker productivity in order to generate economic growth.”

To achieve this increase, foreign direct investment (FDI) must be encouraged.

One way to do this, Mendoza Meza explained, is to increase inflation to a moderate level (between 8% and 9%) and the reference interest rate (between 4% and 5%), in addition to a moderate devaluation of the currency.

“They (companies and investors) work based on profits and returns. If prices increase, they will feel compelled to invest. If you increase the interest rate, investment is encouraged, more money is generated for loans, which mainly focus on the business field,” said Mendoza Meza.

The depreciation of the peso, added the economic specialist, offsets the investment risk by offering an attractive rate, making Mexico a “quite attractive” place to invest.



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