Discusión

In order to put into perspective the minimum wage policy followed in Mexico, this subsec-

tion compares the value of the minimum wage in Mexico with respect to different country

samples. In addition, it also contrasts the trends observed in productivity of the labour

factor across Latin American countries.

Figure 1.9 shows the value of the annual minimum wage in 2013 for the country mem-

bers of the Organisation for Economic Co-operation and Development (OECD). Minimum

wages are expressed in US Dollars Purchase Parity Power (PPP). Mexico not only has

the lowest minimum wage within OECD members ($1,750 USD), its minimum wages fur-

thermore represents only 13% of the average minimum wage of the organisation ($13,190

USD). Moreover, if we look at the relative value of the minimum wage in relation to the

median income within every country, Mexico exhibits the second lowest relative minimum 22_{According to the ENOE, the average number per children for the employed population is 2.1, while} for those households with earnings equivalent to the minimum wage, the average is 2.8. (See Table 1.1)

23_{Indeed, according to the proposal by the Governor of Mexico City (Gob.Distrito-Federal, 2014),} gradual increases to the minimum wage should be implemented until Poverty Line 2 is achieved.

wage, only higher than Czech Republic. Minimum wage in Mexico represents 36.8% of

the median income, while the OECD average is 50.0%.24

Figure 1.9

Real annual minimum wage, OECD country members (Thousand PPP US dollars, 2013)

Even if the value of the Mexican minimum wage is compared with countries with

similar geographical features and level of development, according to the United Nations

Economic Commission for Latin America and the Caribbean (ECLAC), the minimum

wage in Mexico in 2013 was one of the lowest in the region, only above Venezuela.

More relevant is the fact that practically all the countries in the region have suffered

strong episodes of crises and hyperinflation (even deeper than in Mexico), but in general

there have been efforts to implement public policies oriented to recover the purchasing

power of minimum wage. As we can observe in Figure 1.10, only Venezuela, Mexico

and Paraguay exhibit decreasing levels for the three periods showed in the graph (1990,

2005 and 2013).25 On the other hand, there are countries that exhibit important trends

of growth in the real value of the minimum wages, as Brazil, Honduras, Uruguay and

24_{Source: OECD. Accessed on March 28, 2016. http://stats.oecd.org/}

25_{The United States suffered a similar episode. From 1980 to 1990 there were no changes in the federal} minimum wage, occasioning a loss of more than 30% in its real value.

Argentina.

Figure 1.10

Real annual minimum wage, selected Latin American countries (Average annual index, 2000=100)

Maurizio (2014) describes that in Argentina, for example, after a decade of declining

minimum wages in the 1990’s, between 2003 and 2012 the minimum wage increased 200%

in real terms. Similarly, in Brazil the recovery started in the 1990’s, although with a

more accelerated rate during the 2000’s when the purchasing power of the minimum wage

increased by 90%. Uruguay represents other case of an important recovery; in 2004 the

minimum wage was 25% of the real value in 1969, but between 2005 and 2012 it rose by

180%.

One common argument against raising the minimum wage is that changes in wage lev-

els must be justified by increases in productivity, not by decree, a position unambiguously

supported by economic theory. Nevertheless, minimum wage defenders argue that mini-

mum wage itself does not constitute a market price; it is created as a market regulation

with the aim of protecting a specific segment of the labour force (Gob.Distrito-Federal,

2014). In addition, there are efficiency reasons that lead workers to increase the produc-

(1986, 1990) asserts that workers are going to contribute full effort to their jobs only if

they receive the perceived fair wage, otherwise the effort depends on the distance from

the fair wage.26

In order to explore the changes in the labour productivity level in some selected

Latin American countries, Panel (a) of Figure 1.11 compares the worker productivity

trends in Mexico and some other countries in the region. Mexico does not exhibit the

same dynamism of Uruguay and Argentina, but it has a very similar trend to Brazil

and Colombia, countries with an active policy for recovering the purchasing power of the

minimum wage. Furthermore, Mexico keeps some distance with Venezuela, a country

with a comparable trend in the minimum wage (as Figure 1.10 shows).

Moreover, Panel (b) of Figure 1.11 compare the trends followed by the minimum wage

in Mexico and the productivity per worker measured as the GDP per worker. It is clear

that there exists an important gap between the evolution of productivity and minimum

wage. While the minimum wage in Mexico has decreased in real terms, the productivity

of the whole economy has experienced a growth that, although modest, has a positive

trend.

It is clear that the performance of the whole labour market does not necessarily cor-

respond to the productivity for the workers who earn the minimum wage. Unfortunately,

there is no available data on productivity for the specific segment of minimum wage work-

ers, either in Mexico or for other Latin American countries. Nevertheless, we can compare

the gap between minimum wage and productivity for similar countries to Mexico. Taking

as a reference Brazil and Colombia, the trend followed by their levels of minimum wage is

totally different to that observed in Mexico. For the case of Brazil, Panel (c) shows that

during the last two decades the minimum wage growth is even higher than the growth in

productivity. For Colombia, Panel (d), we can observe that the minimum wage trend is

smoother and closer to the pattern followed by the productivity per worker.

26_{The fair wage hypothesis establishes that e = min(w/w∗, 1), where e denotes effort supplied, w} the actual wage, and w∗ the fair wage, and effort is denoted in units such that 1 is the normal effort. Moreover, unemployment arises when w∗ exceeds the clearing market wage.

Figure 1.11

Evolution of the productivity by worker and minimum wages (Index of GDP per hour worked 1988=100, 1988-2012)

(a) Comparative in Latin America (b) Mexico. Productivity vs minimum wage

(c) Brazil. Productivity vs minimum wage (d) Colombia. Productivity vs minimum wage

Thus, the real minimum wage in Mexico seems to be atypical not only compared with

respect to the OECD country members, but also in relation to Latin American labour

markets. Furthermore, the trend followed by the productivity of the labour factor does