MEXICO ESTABLISHES DAILY MINIMUM WAGE FOR 2008

UNCLAS SECTION 01 OF 04 MEXICO 000013 SIPDIS SIPDIS DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, USDOL FOR ILAB E.O. 12958: N/A TAGS: ELAB ECON SOCI PINR PGOV MX SUBJECT: MEXICO ESTABLISHES DAILY MINIMUM WAGE FOR 2008 REF: REF: 07 MEXICO 7042 ¶1. SUMMARY: On Saturday December 22, Mexico,s government announced the establishment of the country,s daily minimum wage for 2008. Mexico,s minimum wage is set annually by a Commission under the auspices of the GOM,s Labor Secretariat at the end of each calendar year. This year the Commission proposed and the GOM agreed to a 4 percent wage increase. Mexico,s organized labor unions had wanted a 10 percent minimum wage increase which they stated was the least amount required to meet the basic needs of working families. In addition to seeking a higher minimum wage, as was the case last year, the unions also sought (unsuccessfully) reforms in how the wage is set. The process for establishing Mexico,s daily minimum wage has become an increasingly frustrating one for the country,s organized labor movement and a source of contention between it and the private sector. Mexico,s unions see the minimum wage as a guarantee for ensuring a basic standard of living for workers. However, Mexico,s private sector does not believe that anyone actually works for the minimum wage and therefore sees it more as a standard of reference. As such the private sector, and to significant degree the GOM, use the process of establishing a minimum wage as a tool for combating inflation. According to the unions and some National University (UNAM) researchers, the minimum wage process as currently established only serve to perpetuate widespread poverty and mass migration in Mexico. END SUMMARY. SETTING THE ANNUAL MINIMUM WAGE -------------- ¶2. Mexico,s minimum wage is set annually at the beginning of the calendar year following a series of intense negotiations among the three elements that make up the National Commission on Minimum Wages (CNSM); an entity under the auspices of the GOM,s Labor Secretariat. The Commission is composed of representatives from the GOM, the private sector and organized labor unions. In addition to setting the minimum wage, the CNSM is also supposed to ensure that the wage set is sufficient to meet a Mexican family,s basic needs. In order to do this the Commission can periodically adjust the minimum salary throughout the year and it publishes a monthly bulletin to officially inform the public of the legal minimum wage. ¶3. In theory, and according to Mexican law, the country,s new annual minimum wage should take effect on the first day of a new calendar year. Moreover, the minimum wage the CNSM ultimately announces should be based on a signed agreement between the three parties to the Commission. In practice agreement on a minimum wage occasionally slips into mid January and there have been times when all parties within the CNSM failed to agree. When that happens, the minimum wage decreed by the CNSM is considered a suggested wage floor that employers are expected but not legally obliged to follow. ¶4. Another facet of the minimum wage in Mexico is the fact that the country actually has three minimum wages (wage A, B and C),each determined by geographic regions. The highest minimum wage is in urban areas designated as region A and the lowest are in rural areas or areas with low levels of industrialization designated as region C. The previous presidential administration of former President Fox had promised that it would establish a single wage region for all of Mexico but failed to implement the legal and administrative changes that would have made this promise a reality. Mexico,s organized labor movement had hoped that the current administration would establish a single minimum wage for the entire country and had lobbied for this goal in this year,s negotiations. Unfortunately, from the union perspective, the other two parties to the CNSM were unwilling to establish a single national daily minimum wage for 2008. MINIMUN DIALY WAGE FOR 2008 INCREASED BY 4 PERCENT -------------- -------------- ¶5. Mexico,s organized labor sector went into the negotiation for the 2008 daily minimum wage publicly insisting on an increase or at least 10 percent. Privately the labor sector hoped for a 6 percent increase and would MEXICO 00000013 002 OF 004 probably have been happy getting five percent. The 4 percent increase the CNSM announced for 2008 was essentially the increase of 3.9 percent announced for 2007 (Ref). During the negotiations for the 2007 minimum wage the unions were unhappy with the increase the CNSM established but reluctantly agreed to accept it as a vote of confidence in the new administration of President Felipe Calderon which at that time had been in office less than a month. For 2008 the unions accepted a wage which they considered &insufficient8 and a &farce8 in order to avoid being portray as obstructionists and because they had no choice. The GOM and private sector elements presented the labor sector with a take it or leave it situation and the unions felt compelled to accept. ¶6. The new daily minimum wage took effect on January 1, ¶2008. The new minimum wage by geographic region in Mexico is as follows: In Region A which includes areas like Mexico City and selected parts of the states of Mexico, Baja California, Chihuahua and Guerrero the wage is ) 52.59 (approx. USD 4.82); in Region B with areas like the cities of Monterrey, Guadalajara, Hermosillo and Tampico, the wage is ) 50.96 (USD 4.67); while in Region C with cities like Aguascalientes, Puebla, Oaxaca, San Luis Potosi and Zacatecas the rate is ) 49.50 (USD 4.54). UNIONS SEE MINIMUM WAGE PROCESS AS EXTREMELY FLAWED -------------- -------------- ¶7. Although Mexico,s organized labor sector felt compelled to accept a minimum wage lower than it had hoped it did not feel compelled to accept this wage in silence. From the perspective of Mexico,s labor sector the minimum wage should be adequate to meet a family,s basic needs. The unions assert that meeting these needs is one of the main responsibilities of the CNSM and they have been very vocal in their criticism of the Commission,s failure to meet this responsibility. Representatives of the Confederation of Mexican Workers (CTM),the Mexican Electrical Workers Union (SME) which is part of the confederation called the National Workers Union (UNT),and the Revolutionary Confederation of Workers and Campesinos (CROC),respectively the country,s three largest labor federations, pointedly remarked that the minimum wage was not a living wage. Furthermore they questioned the utility of an entity (the CNSN) and a process (the minimum wage negotiations) that failed so completely in one of its main responsibilities. ¶8. The criticisms of these labor federations were picked up and expanded on by several nation newspapers. These news outlets cited studies reporting that the approximately 365 pesos a week earned by a worker in Region B (approx. USD 33.49) would not be enough to cover the basic basket of items needed by a Mexican family. These studies relied on a basic basket of goods established by Mexico,s central bank and the GOM,s equivalent of the US Consumer Protection Agency which contained ten categories of items such as edible oils, hygiene products, meat, poultry, fruits, vegetables, eggs, milk, etc. Using this basic basket the studies concluded that in order to buy items from all ten categories a worker would have to earn a minimum of 600 pesos per week (approx. 55.04). PRIVATE SECTOR SEES CNSM AS TOOL TO FIGHT INFLATION -------------- -------------- ¶9. Perhaps the main reason why the CNSM is viewed as such a failure by Mexico,s organized labor movement is that the Commission is seen so differently by the country,s private sector. Mexico,s private sector representatives on the CNSM are convinced that no workers actually accept jobs paying only the minimum wage; therefore they see no reason to try and raise the minimum wage to a level that would cover the cost of a basic basket of goods. What the private sector representatives do see, and they are not really wrong in this matter, is that over time the minimum wage has changed from a floor for maintaining a worker,s basic standard of living into a standard of reference that impacts all aspects of Mexico,s economy. ¶10. Mexico,s minimum wage was originally established to MEXICO 00000013 003 OF 004 provide a basic standard of living and apparently it initially succeeded. However, an unintended consequence of this success was that everyone knew exactly what the daily minimum wage was. This widespread knowledge of the exact amount of the minimum wage soon lent itself to other unintended purposes. First job offers, then private service fees and ultimately government fines, tax tables and a broad range of other financial indicators were increasingly determined by multiples of the daily minimum wage. This practice has now become so prevalent throughout Mexican society that a clear link can arguably be drawn between increases in the daily minimum wage and the level of inflation in Mexico. Consequently, the private sector members of the CNSM see their role as that of holding the line against inflation. The GOM,s actions on the CNSM in consistently voting with the private sector in minimum wage negotiations and against the labor unions, demands for higher wages seem to imply that the government too sees the Commission as a tool for controlling inflation. CNSM BOTH FIGHTS INFLATION SETS REAL WAGES -------------- ¶11. Because of the widespread use of the official minimum wage by both the private sector and all levels of government in Mexico as a standard of reference it would be hard (and probably futile) to argue that it does not have a very real impact on inflation. What has not been very successfully argued for some time is the proposition that for many Mexican workers the minimum wage is their real wage. The thinking of many in the private sector and apparently some levels of the Mexican government is that since no one could live on the minimum wage then clearly no one does live on the minimum wage. Consequently, they see nothing to be gained by trying to raise the wage to a level that would actually enable a worker to cover the costs of the basic basket of goods and a great deal to be lost in terms sparking inflation. ¶12. This perspective is now being challenge by an NGO named the Center for Labor Investigations and Union Consultants (CILAS) and researchers in the Faculty of Economic at the Autonomous National University of Mexico (UNAM). According to CILAS, some 30 million Mexicans live on 30 pesos a day, another 20 million live on 12-22 pesos per day. CILAS argues that many of these people are part of the working poor but that they earn so little that in order to survive their only options are to beg, engage in criminal activities or immigrate. ¶13. A study done by the UNAM researchers which focused mainly, but not exclusively, on workers in Mexico,s manufacturing sector vigorously contested the CNSM argument that few if any Mexicans actually work for the official minimum wage. According to the researchers some 10.8 million Mexicans work for the daily minimum wage or less. Mission Mexico,s Labor Counselor has personally met janitorial and retail store workers in Mexico City, and Maquiladora (foreign owned assembly plants) in the state of Puebla who work for only twice the daily minimum wage or less. This figure, the researchers said, represented 23.9 percent of all working age Mexican. Moreover, UNAM researchers added, another 9.56 million workers make only 2 times the minimum wage which at best would be 105.18 pesos (approx. USD 9.64). Together, the UNAM team asserted, these two groups represent 67 percent of all working age Mexicans. COMMENT -------------- ¶14. The process of establishing a minimum wage in Mexico is severely complicated by the fact the three elements who determine the wage see the process very differently and to a significant degree all three are right. The private sector and the GOM see the minimum wage process, correctly it would appear, as a tool for combating inflation. Mexico,s organized labor sector views the process, also apparently correctly, as a way to maintain a basic minimum standard of living for workers. The results of these differing perspective on the goals of establishing an official minimum wage contributes to a process that is somewhat effective in fighting inflation but which leave much to be desired in MEXICO 00000013 004 OF 004 terms of providing workers with a basic standard of living that discourage recourse to begging, crime or immigration. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / BASSETT