Inflation: The purchasing power of wages in Mexico suffers its worst fall since 2017


A woman sells vegetables in a market in Mexico City.
A woman sells vegetables in a market in Mexico City.Madla Hartz (EFE)

There is no possible effort that can with the increasing escalation of prices in Mexico. The increase that has been made to wages in the country has been canceled and workers have lost purchasing power, which has led them to change their food consumption habits. According to data from the Ministry of Labor and Social Welfare, in the country contractual wages -which make up around 60% of the income of formal workers- had a nominal increase of 5.1% in November, which translates into a loss in the purchasing power of 2.14% after deducting the amount of inflation, which was 7.37% per year, the highest figure since 2001. This is the worst drop in purchasing power for Mexicans in four years .

By activity, according to Labor figures, the wage adjustment in industry fell 1.94% at the real rate, with manufacturing and mining being the main ballast, decreasing 2.01 and 0.84%. In services the decrease was 3.05%. The greatest contraction in wages was observed in Oaxaca, with a 4.59% reduction in purchasing power, followed by Tabasco, with 3.11%.

While a 22% increase has been announced for the minimum wage in 2022, very few workers receive the minimum income, according to David Lozano, an academic at the Center for Multidisciplinary Analysis (CAM) of the Faculty of Economics of the UNAM. Until last year, according to figures from the Government of Mexico, 13% of workers earned the minimum wage. “The population that receives the minimum wage is decreasing. Most are of a contractual nature, which are the ones that have had the least increases and thus we see a loss of more than 80% in the last two decades ”, he points out.

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According to an investigation by the CAM to which EL PAÍS has had access, workers have to make an outlay of 301 pesos a day (about 15 dollars) in order to buy a recommended food basket -which includes the price of forty basic foods without count the instruments for their preparation-, while if the cost of electricity and gas for cooking is added, the price rises to 465 pesos a day (almost 22 dollars).

This phenomenon has caused Mexican households to prefer to consume food in the informal market, such as in tianguis (markets on wheels) that may be of lower quality. “Mexicans who choose to buy in the informal sector or poor quality products increased 18%, according to our study,” says Lozano.

The basic ingredients of Mexican cuisine have undergone significant increases. The green tomato, the tomato, the fresh chilies and the onion, just to mention a few, are the ones that have presented the most increases in the last month. The consumption of tortilla, the basis of the country’s dishes, is beginning to be sacrificed due to the large increases. “For the first time we see that they stop consuming products that were originally in the basic basket to be able to face the increases,” says economist Lozano.

Gabriela Siller, director of economic analysis at Banco Base, points out that the recovery of the labor market has not occurred in a uniform way. “A good part of the jobs are recovering their occupation in informality or with lower wages,” says the analyst. However, if the price increase continues for the following year, the outlook for the country’s workers is even more bleak. “This is a global trend increased by the low availability of food that will affect families in Mexico, without a doubt,” concludes Lozano.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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