Inequality and minimum wage policy: Not even talking, much less walking in Mexico

Abstract

This paper examines the evolution of economic inequality in Mexico in the last three decades, both in terms of the personal distribution and the functional distribution of income, partly exploring the question of how much of its evolution is determined by economic or social policies. The second purpose of our paper is to analyze the relation between the evolution of the functional distribution of income and labor policy, with special emphasis on minimum wage policy. Finally our third objective, closely linked to the previous two, is the examination of the institutional context as well as the ideological and political economy considerations that have marked minimum wage policy in Mexico in view of the successful attempt to bring the debate back to the forefront of the political agenda. As such, our analysis will pay special attention to events since May 1st 2014, when the Chief of the Government of Mexico City launched a national discussion on the urgent need, ways and means to renovate minimum wage policy in Mexico. In our view, this debate is perhaps the only recent expression in Mexico of the current re-found concerted focus on inequality on a global scale, an expression that has woken up fierce opposition from key sectors of the Mexican elite and highly placed government officers in the current administration.

Analysis of the relationship between income inequality and social variables: Evidence from Indonesia

“…It can be concluded that minimum wages can reduce poverty, thereby reducing income inequality. This finding goes with the results of Bird and Manning (2008), Krozer et al (2015), and Brito and Kerstenetzky (2019). Also, the effect of minimum wage shock is negative on health deterioration and positive on education.…”

“…Gindling and Terrell (2010) found that relatively high increases in minimum wages led to poverty reduction, especially extreme poverty. Krozer et al (2015) captured that raising the minimum wage significantly becomes a major step towards placing income inequality as a top priority on the policymaking agenda. Brito and Kerstenetzky (2019) revealed that minimum wage contributed to a decrease of 38.2% in the proportion of the poor, and 39.4% in the intensity of poverty and 40.6% reduction in the severity of poverty.…”

Aiming to keep poor Mexican families at the breadline (but no higher): The effects of minimum wage, tax, and social policy changes between 1994 and 2012

“…Research on the causes of variations in poverty and inequality offers different accounts (Esquivel, Lustig, & Scott, 2011;Krozer, Moreno-Brid & Rubio Badan, 2015;Levy & Schady, 2013;Scott, 2014). Esquivel et al (2011) found that inequality decreased between 1996 and 2007 due to the rise in labor income of low-skilled workers and the expansion of social assistance conditional cash transfers.…”

“…Cortés, Banegas, and Solís () found that for the period 2002–05, conditional cash transfers reduced the lowest poverty rate by only one percentage point, and the other two rates by even smaller proportions, reductions that they consider to be not very significant in view of the program's size. Krozer, Moreno‐Brid, and Rubio Badan () argued that research on the causes of reductions in the Gini coefficient missed the facts that income shares at the top and the bottom deciles have not registered significant variations, that gains at the bottom from additional government transfers and services were matched by increases from other sources at the top, and that the cause was losses in labor earnings of the poorest deciles linked to the drop in the real value of the minimum wage and gains of the richest ones.…”

Has Social Policy Expansion in Latin America Reduced Welfare Decommodification and Defamilialisation? Evidence from an Overview of the Mexican Welfare Regime

“…The effects of the liberalisation of the economy can be pointed out as one of the reasons for higher degrees of familialisation. Economic liberalisation has been accompanied by a steep drop in real wages, due to the export-oriented growth model that requires low labour costs to promote competitiveness (Krozer et al, 2015). In this context, families come together to face economic and social uncertainties, as suggested by the average number of earners per household, which increased from 2.03 in 2004 to 2.4 in 20142.4 in (INEGI, 2019c.…”