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A rising wage lifts all boats?

24 November 2016

Joseph Stiglitz  was asked about the noises from the United States (mostly emanating from the soon to be whiner-in-chief) about renegotiating what the Nobel Economics Laureate has long considered a flawed agreement.  Stiglitz noted that a “free trade agreement” presupposes the free exchange not just of goods and capital, but of labor as well.  For NAFTA to actually have free trade when it comes to labor, one of two things would need to happen.  Either US and Canadian wages would need to fall to those in Mexico, or Mexican wages would need to rise dramatically.

indexI’m probably misquoting Stiglitz (I read today’s Jornada across the street from a fashion store which was blaring out loud hip-hop and old disco to attract customers, and annoy  unfashionable types like the people who read newspapers at cafes).  I expect US wages will be dropping, and I don’t see much support from the one percent for immediately raising them.  And, of course,  Mexican wages are hardly going to reach US levels any time in the foreseeable future.  If ever.

Which doesn’t mean raising the “salario minimo” isn’t recognized by the elites as a economic priority.  While the salario minimo (a daily, rather than hourly, rate) was once based on a “basket”… the market price for the bare essentials needed by a person working six days a week (and paid for seven) to support a family of four (which besides tortillas and beans, was calculated by the price of mangoes, cooking gas, bus fare, fish for Friday dinner, and other things)… the labor “reforms” of the present administration changed the formula, allowing for hourly pay.  This did raise the salario minimo, especially in rural areas (the old system had different rates reflecting the basket price in different areas of the country) but not enough to reflect the rising cost of living.

Business people at least understand that if people aren’t earning enough to meet the basics, they’re not buying.  So, the Confederación Patronal de la República Mexicana (COPARMEX), basically, the Business Leader’s Union, has come out favoring a return to the old “basket” system, with an immediate raise in the wage to reflect inflation, and a stepped rise over the next year of between 13.02 and 13.20 pesos to reflect from state benefits that the “labor reforms” stripped away, but were essential to survival at the ridiculously low salario minimo.

$ 89.35 isn’t much (about 4.30 US$ today), and I’m not sure how anyone would survive on that (I allow myself more than that in daily pocket money, and am about as moderate a spender… some would say downright cheap… as you’d find), but one thing that has to be noted is that the salario minimo is a bottom rate, and the minimum rates for any sort task that can be defined as a work “type” (everything from field hand, to general assistant, to delivery person, to teacher, or doctor) has a higher rate, usually a multiple of the “salario minimo”.

In addition to calling on Congress to raise basic wages, COPARMEX is looking to lower the costs for some public programs.  When the salario minimo was de-indexed from the basket, a unit called the UMA (Unidad de Medida y Actualización) was invented, initially at the amount as the salario minimo, but indexed to inflation.  Where some payments to the government (like traffic fines) were in units of the salario minimo (say five salarios for an illegal left turn), as well as some “ability to pay” government programs (like INFONIVIT, which provides home mortgages, or FONICAT, which underwrites some costs for home appliances and furniture), the UMA replaced the salario minimo.

That gets confusing, but the UMA is set yearly by the inflation rate, and would be substantially less than the salario.  Clarifying that government benefits were based on UMA would qualify more people for various programs.

Still woefully low, but at least the one percenters recognize it.

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One Comment leave one →
  1. Allen Manana permalink
    24 November 2016 9:57 am

    For the average ex-pat prices here. in reasonable cities. are moderate. Gas is a little pricey, both types. Liquor is relatively cheap but more expensive than California.
    But the staples, wonderfully fresh vegetables, chicken and beef are cheap. Strangely frozen camarones (shrimp) are cheaper in Toronto.
    The average worker in the big name tiendas, (Ley’s, Soriana, Mega, Coppel ) is earning $110 MXN per day with health insurance. Far too many are single mothers. How do they feed a family on $600 MXN per week, tortillas and beans.
    To live, almost reasonably, at least double the daily rate is needed. Surely that would result in a few job losses…………..temporarily .
    And yes, a rising tide does raise all boats.

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