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Up to the minimum wage, an unhelpful move in a Mexico with informal employment

The recent rise of 10.4% in the daily minimum wage in Mexico to 88.36 pesos per day (about 4.7 dollars) is a good political move, but not very useful in a country where 57% of the population work in informality and few employees receive such a low salary.

Mexico, Nov 23 (EFE) .- The recent rise of 10.4% in the daily minimum wage in Mexico to 88.36 pesos per day (about 4.7 dollars) is a good political move, but not very useful in a country where 57% of the population works in informality and few wage earners receive such a low salary.

"The rise is mostly symbolic as far as the economy is concerned. formally, those who receive the minimum wage for working full time is a very small number, "Carlos Elizondo, professor at the Technological School of Monterrey.

President Enrique Peña Nieto announced on Tuesday that the general minimum wage went from 80.04 pesos a day (4.3 dollars) to 88.36 pesos a day (4.7 dollars) as of December.

"With this increase, in the last five years the minimum wage has had a recovery of 20% in real terms, this is 45% in nominal terms, which had not happened more than 30 years ago, "he announced triumphantly at an event held at the Los Pinos residence.

Mauricio González, founding partner of the GEA policy and economy consultancy, He told Efe that this increase is an example where "politics contaminates economic decisions."

He argued several reasons. so that a person can live for a month with less than 3,000 pesos per month (about 160 dollars), "this daily minimum wage being one of the lowest in Latin America.

Even own employers, through the Employers' Confederation of the Mexican Republic (Coparmex), had called the National Commission of Minimum Wages (Conasami) to increase the salary to the 95.25 pesos (five dollars), in order to reach the welfare line.

The increase, González continued, will benefit some 40,000 people -from a universe of 52 million workers- who today they obtain the minimum daily wage in formal jobs.

These people will gain purchasing power over inflation -which this year will close at around 6% - but, according to the expert, this rise can give a counter-productive signal to the economy.

The Bank of Mexico, which has control over inflation in its mandate, says that in 2018 it will return to a point close to 3%.

"But if you see that the current one is above 6% and that the salary increase will be 10%, you can hardly believe it. (...) There may be a fracture in It would end with an increase in interest rates - at 7% - to control prices, but that would make credit more expensive and would impact everyone, González explained.

The decision leaves to the air the control of the prices to the consumer: "When you put in a balance the number of people benefited by the increase of the minimum wage, you can potentially harm (the rest) by the monetary policy that should be taken, more strict, "he said.

On the contrary, Elizondo foresaw a" marginal "impact on inflation in 2018. The problem is not the minimum wage, but the use that has been made of it, said.

For Gonzalez, the minimum wage is "distorted", because until January 2016 and for years was linked to about 2,400 prices, rates, fines and other variables, one of the reasons why it stayed so low for a long time.

But the real problem lies in informality, experts agreed, which registered a rate of 57.2% of the employed population in the third quarter of 2017, the equivalent of 30 million people.

Without a contract, without social security, many of these Mexicans live in the precariousness and work to continue being poor.

In such a way that the country has 43.6% of the population in poverty -53.4 million people-, according to the latest report of the National Council for the Evaluation of Social Development Policy (Coneval).

"If it were so easy to increase the income of salaried workers by decree in Mexico, there would be no poor people. measure is not the most appropriate. demand for work, generating conditions so that there is more investment that generates formal work. the rest, I think rhetoric, "he said.

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