tutor2u | Employment gains from a higher Mexican minimum wage

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Employment gains from a higher Mexican minimum wage

Geoff Riley

12th April 2017

A rise in Mexico’s poverty-level minimum wage increased both wages and employment in the area in which it was attempted, according to research by Jorge Bouchot, presented at the Royal Economic Society's annual conference at the University of Bristol in April 2017.

In 2012, one of Mexico’s three national wage zones bumped up the minimum wage, which during the last 30 years has lost 70% of its purchasing power. While many economists assume that raising the minimum wage causes unemployment by increasing the cost of staff for businesses, the new study finds that the reverse was true: wages and employment both increased. Fewer people also worked in the informal sector, where wages also increased.

The author concludes: ‘There are some important positive effects on the labour market of raising the minimum wage in Mexico. These findings indicate that it can be a powerful instrument in the fight against poverty.’

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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