The Salary and Employment: International Evidence and Possible Impacts for the Mexican Case

Abstract

In this article I analize previous international empirical evidence on minimum wages as well as I estimate possible impacts on prices from a possible minimum wage increase in Mexico. In terms of previous literature, the most compelling evidence points to a null impact in employment of a minimum wage increase if the increase is “modest” and the original minimum wage is relatively low. That literature has also found that part of the effect of the increase of the minimum wage translates into higher prices as well as efficiency improvements. Under some specific assumptions, increasing the minimum wage by 51% has an impact up to 3% in prices, improvement in real wages of low-skilled workers by 8% and a decrease in labor poverty by 4%. The price impact is lower if the increase in the minimum wage does not affect workers earning less than one minimum wage or workers in the informal sector.