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News Article

Average Wages “Rise” Following Heavy Job Losses

By Peter Appleby | Tue, 07/14/2020 - 13:56

The COVID-19 crisis appears to be taking much the same pattern as crises that have come before it. As in most financial disasters, it is those least able to protect themselves from economic fallout that suffer the heaviest blows.

According to El Financiero, the overwhelming majority of the 1,113,677 job losses in the formal sector reported by IMMS yesterday – 80 percent says the National Commission on Minimum Wage – were among low wage workers. Excelsior reports that 68.7 percent of those that lost their jobs were earning between the 2020 Mexican minimum wage rate of MX$123.22 (US$5.5) per day and MX$246.44 (US$10.97) per day. The construction, manufacturing, and domestic services sectors suffered the highest rates of job losses in the country.

These job loss figures are the highest since IMSS began keeping records and have had a knock-on effect for wage rates of those still employed. The paper reports that in May and June this year, the Base Contribution Salary (SBC) for insured workers rose 8.1 percent in nominal terms. This means that the average SBC in May was MX$408 (US$18.2) per day with a very slight drop to MX$407.4 (US$18.1) per day in June. This is the highest rate since July 2002.

According to analysts, the high job losses and increase SBC rates are connected as low-wage job losses have an “arithmetical effect” on this rate. Senior Specialist in the Labor Markets and Social Security Division of the Inter-American Development Bank (IDB) told El Financiero that the increased SBC rate was not necessarily news for celebration as it was likely influenced by heavy job losses.

"We should be cautious about average wage increases in the formal sector because they largely reflect the job losses of those who earned less … as a product of the COVID-19 crisis," he explained.

The increase in SBC rates is likely to flatten out as the economic reopening in Mexico City, currently on “orange” according the county’s traffic light system, and other major cities continue. Jobs on construction, retail and domestic services should climb as lockdowns ease, though at a slower rate than the national government has predicted.

The economic recovery plan presented by President Andrés Manuel López Obrador promises to create two million jobs. However, as reported by Mexico Business News yesterday, the government’s spending power has been blunted by the crisis.

Peter Appleby Peter Appleby Journalist and Industry Analyst