That “five dollars a day” is now… $3.98

I buy my eggs at the neighborhood grocery by the half-kilo. Some of my neighbors — who are earning the salario minimo, or a bit more — buy theirs by the peso. They have to watch every centavo, and figure the family food budget based on what cash is on hand that day. It’s not usual to hear someone ask for four pesos of eggs, four of tomatoes and ten pesos of beans rather than a quarter kilo of eggs, three tomatoes and a bag of beans.

For them, the below-inflation raise in the salario minimo is going to create new challenges. From The (Mexico City) News (links tend to disappear after a day or two):

The below-inflation hike to Mexico’s national minimum wage will help preserve jobs, although workers will be unhappy, experts said on Friday.

“The main reason the wage hike was below inflation levels reflects the worsening [economic] situation … a lot of companies are trying not to fire people but to implement cost cutting measures,” said Gabriel Casillas, an economist at UBS Bank México.

The National Commission on Minimum Wage, or Consami, said Friday that it would raise the top rate minimum wage by 4.6 percent to 54.80 pesos ($4.18) a day on Thursday. Lower minimum wage rates of 53.26 pesos and 51.95 pesos apply in some areas.

However, the Association of Mexican Human Resource Professionals, or Amedirh, said it was stunned that the wage increase had come in so far below inflation, which was 6.23 percent in the 12 months ending on Nov. 30, according to statistics published by the Banco de México.

Approximately 5 percent of Mexican workers receive minimum wage, and they are seeing their purchasing power weakened every day, she said.

What I see in U.S. and foreign presses all the time is a confusion between this figure (or these figures) and “average wage”. Mexican workers are not paid an hourly figure, but a daily one. The person receiving the “salario minimo” may only work that particular job a few hours a day. And, if they are a regular employee, their paycheck also includes one day of rest per week, vacation and year end bonus pay.

In theory, it’s based on the cost of basic goods and services, needed to support a family of four. The calculations include such things as the price of milk, mangos and beans, as well as cooking gas, transportation expenses and electricity. It doesn’t really meet a family’s needs (and doesn’t include — but should — things like school supplies and union dues), but with a state-run medical system and assuming the family receives assistance for school uniforms and supplies, it is possible to get by, if the family owns their own home.  That five percent who live on the salario minimo are sometimes “not in conformity” with the Mexican constitution’s stated human right to a decent home, though they are usually people having SOME kind of home.

The other thing that needs to be understood is that the figures reported ONLY apply to unskilled general labor. Everything from janitors to carpenters to editors to financial analysts have a set “salario minimo”. Salaries are low here (and some of us, like I do, fall into anomalous categories that don’t have a set wage, or are — like commissioned sales persons — not covered by these rules.

However, the lower than inflation raise in the salario minimo cuts into everyone’s purchasing power, not just the low wage worker. Job contracts are usually written as so many times the salario minimo — what’s a few centavos difference to the fruit picker in Chiapas is a few hundred pesos to the Mexico City executive whose salary is expressed as 1250 salarios.

And, things like legal fees and fines are not a given amount in the law, but a number of salarios minimos (a parking ticket in Mexico City, for example, is 2.5 salarios. It saves the trouble of revising the traffic code every time there’s a change in the currency value).

Still, while controlling wages may be a time-honored way of controlling inflation, its the housewife who buys her beans not by the kilo, but by the peso who is going to be cutting back, not the bankers and economists.