December 17, 2019

Mexico to Increase General Minimum Wage by 20 Percent for 2020

Holland & Knight Alert
Leslie Palma

Highlights

  • Mexico's National Minimum Wage Commission announced its decision to increase the general minimum wage to 123.22 Mexican pesos (approximately US$6.50) a day in 2020.
  • The 20 percent increase is intended to boost the buying power of Mexican consumers and strengthen the nation's economy.

Mexico's National Minimum Wage Commission (Conasami) approved increasing the general minimum salary to 123.22 Mexican pesos from 102.68 Mexican pesos, representing a 20 percent gain. The increase takes effect on Jan. 1, 2020. Minimum wage for the North Border Free Zone, which already has a higher minimum wage, will rise by only 5 percent, to 185.56 Mexican pesos per day. Minimum pay for professionals also will increase by only 5 percent. The announcement was made on Dec. 16, 2019.

Objective of Wage Increase

The government of President Andres Manuel Lopez Obrador continues to move forward with its plans to close the wage gap with its 2020 wage hike. The 20 percent increase is greater than the current rate of inflation, which slowed to less than 3 percent in November. It is also on top of the 16 percent increase in the 2019 minimum wage. The government's goal is to improve the purchasing power for many Mexicans who experienced stagnant salaries during a period of inflation. About 11 million Mexican workers earn minimum wage.

In calculating the 2020 minimum wage, Conasami used the Independent Recovery Amount (MIR) that was first employed in 2016. The MIR's purpose is to help set the minimum wage at a level that allows workers to earn enough money that they at least reach or exceed the poverty line set by the National Council for the Evaluation of Social Development Policy (CONEVAL). The 2020 wage hike is projected to keep a single earner above the poverty line.

Advances in free trade talks also played a role regarding increasing the salaries. The World Trade Organization's (WTO) discussion regarding the relationship between "trade and work" achieved significant progress, notably in the labor chapter of the Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP). The CPTPP is a free trade agreement between Mexico and 10 other countries in the Asia-Pacific region. The accord includes its own set of minimum wage obligations independent of the international commitments set under the International Labour Organization (ILO): "Each Party shall adopt and maintain laws and regulations, and practices that derive from these instruments, which regulate acceptable work conditions with respect to minimum wages, work hours, and work safety and health."1

In the U.S.-Mexico-Canada Agreement (USMCA) negotiations, country representatives also suggested the minimum wage is a major topic because of unequal labor standards, especially in regards to Mexico.

Holland & Knight will continue to provide updates and analysis of the latest news and policy decisions and how they could affect our clients and their businesses.

For more information or questions about how the minimum wage increase may affect your business, contact the author.


Notes

1 Article 19.3.2: Labor Rights.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.


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