Economics: Addressing more than minimum wages
Perhaps the labor-related issue that then-presidential candidate Andrés Manuel López Obrador spoke about the most on the campaign trail was his promise to significantly raise federally mandated minimum wage levels. He had no monopoly on the idea as even his center-right rival, Ricardo Anaya, made similar promises, but AMLO focused more narrowly on the idea of doubling such wages for the purpose assuring that they will suffice to pull a worker’s family above the poverty line. But such a one-dimensional approach to improving income levels is likely to have unintended adverse consequences that could quickly erode the value of such wage hikes and ultimately deprive the high percentage of low-wage workers in micro and informal family businesses of their jobs.
A more comprehensive approach needs to build on the progress achieved since the great recession in moving increasing numbers of workers out of conditions of informality and into payroll jobs, as well as on the modest growth trend in formal sector real wages and benefits that was interrupted by the inflationary effects of gasoline price hikes beginning in January 2016. But the positive trend has resumed so far in 2018, as contract wage negotiations have responded to the inflation rise with average 5.3% nominal wage increases.
The incoming government that will take charge of economic policy should proceed prudently if it does not wish to accelerate the race between wages and other prices, and hopes to see a continuation or re-acceleration of formal sector employment. So while putting into effect minimum wage increases during the López Obrador administration, in order for such wage hikes to have a lesser impact on production costs, and so that the aforementioned negative consequences might be attenuated, steps would have to be taken to strengthen labor productivity, which has been growing at a very slow pace for many years.
Some measures that could help accelerate productivity growth include programs for work training and acquiring machinery and equipment as well as promoting the introduction of technologies and the development of better products. Logistical upgrades would be especially relevant in urban areas with the country’s largest concentrations of workers. In light of governmental budgetary constraints, such programs could be focused on enterprises that employ people who are paid less than the minimum wage or between one and two minimum wages, thereby helping them access better jobs and professions.
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