Effect of the minimum wage on employment in Mexico (2018-2024)

Effect of the minimum wage on employment in Mexico (2018-2024) Raymundo M. Campos Vázquez and Atzin Chiguil-Rojasa a Centro de Estudios Económicos, El Colegio de México. We would like to thank the two anonymous reviewers for their comments, which significantly improved this paper. Any errors or omissions are the sole responsibility of the authors. Email addresses: and respectively. Date received: April 21, 2025. Date of acceptance: August 19, 2025. Abstract This study evaluates the effects of the cumulative increase in the minimum wage since 2018 on employment in Mexico, treating the country as a single unit. To this end, two methodologies were employed. First, the synthetic control method was used to compare Mexico with similar Latin American countries that did not experience a sustained increase in the minimum wage. Second, we used aggregate information from cities that self-represent in the National Occupation and Employment Survey (NOES) in Mexico, taking advantage of the heterogeneity in how the minimum wage affects each city. The results suggest that there have been no negative effects on employment. Keywords: minimum wage; employment; labor market; synthetic control; informality. 1. INTRODUCTION1 In recent years, there has been a substantial change in wage policy in Mexico. Since 2019, the minimum wage has increased significantly, rising by 16% in the country and doubling in the Northern Border Free Zone (Zona Libre de Comercio de la Frontera Norte, or ZLFN). Since then, the minimum wage has increased consistently each year. This has made it possible to study the effect of the minimum wage on the ZLFN in relation to the rest of the country.2 However, little is known about this last point because it is generally chosen as a comparison group rather than a study group. This article discusses the potential effect that the minimum wage has had on employment across the country since 2019, when significant increases in the minimum wage came into effect. Figure 1 shows the evolution of the minimum wage in Mexico and other countries. The graphs create a minimum wage index with a base of 100 in 2018. Panel A compares the evolution of the minimum wage in Mexico and a selected sample of countries, including Brazil, Chile, Colombia and Costa Rica. Figure 1 clearly shows the significant increase in Mexico’s minimum wage, which is notably higher than that of any other Latin American country. It also shows that, between 2018 and 2023, Mexico experienced an 82% cumulative increase, compared to 17.5% in Chile, 9.8% in Colombia and 3.5% in Costa Rica. Panel B shows the trajectory of the minimum wage for the ZLFN and the rest of the country between 2018 and 2024. The graph shows that the minimum wage increased by 216% in real terms in the ZLFN and by 110% in the rest of the country. This increase, particularly in the ZLFN, is one of the largest observed since 1960 compared to other countries (CamposVázquez et al., 2020).3 Figure 1. Real minimum wage in Mexico and other countries Source: prepared by the authors with information from the ECLAC and the Banco de México. The information corresponding to Panel A is available in the Real Minimum Wage series at: https://statistics.eclac.org/portal/eclacstat/dashboard.html?lang=es. The real minimum wage in Mexico and the ZLFN was obtained from https://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?sector=10&accion=consultarCuadroAnalitico&idCuadro=CA601&locale=es. Panel A includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, the Dominican Republic, Trinidad and Tobago and Uruguay. Panel A of Figure 2 shows the evolution of the real minimum wage in Purchasing Power Parity (PPP) in various Organization for Economic Cooperation and Development (OECD) countries. In Mexico, the minimum wage increased from US$1.3 to US$2.4 in constant PPP per hour between 2018 and 2023, the largest increase observed compared to other countries including Chile, Colombia and Costa Rica. This increase is consistent with the aforementioned cumulative growth, although it is important to note that the minimum wage level remains relatively low in international comparison. Meanwhile, Panel B shows that, during the same period, the ratio of minimum wage to average wage increased from 33.7% to 55.2%, an increase that had not been observed in any other country during those years. This international comparison reflects a significant increase in purchasing power observed in Mexico in recent years. Figure 2. Minimum wage in Mexico and other countries Source: prepared by the authors with information from OECDStats. Information on the minimum wage in real terms in PPP can be obtained from https://dataexplorer.oecd.org/ In recent years, various studies have assessed the effects of the minimum wage on employment, wage structure, poverty and inflation, comparing the ZLFN as an intervention group and the rest of the country or certain cities in the country as a comparison or control group.4 In terms of employment, no relevant negative effects were found at the aggregate city level using ENOE data or administrative data from the formal sector of the economy of the Mexican Social Security Institute (IMSS) (Campos-Vázquez et al., 2020; Campos and Esquivel, 2021; CONASAMI, 2019; Fernández Bujanda, 2020; Martínez Gonzaléz, 2020; STPS, 2019). Previous evidence shows that the minimum wage has had zero effect on employment in Mexico, both in the period before the increase and in the case of the ZLFN until 2021. The zero effect on employment is not due to a lack of change in workers' incomes. Empirical evidence indicates significant increases in the labor income of low-income workers (Campos and Esquivel, 2021). These increases, and their zero effect on employment, would appear to be important contributors to the minimum wage reducing the incidence of poverty (Campos and Esquivel, 2023). On the other hand, no significant effects on inflation were recognized and, if any were found, they would be of a lesser magnitude (Campos and Esquivel, 2020; Calderón et al., 2023). Thus, the state of the literature in Mexico shows that the minimum wage has had positive effects on income and has contributed to reducing poverty, while its effects on employment and the level of inflation have been negligible or limited. However, relevant studies have not yet focused on studying the country as a whole. It is possible that the minimum wage has a negative effect at the aggregate level and the above results indicate that the ZLFN simply did not fare as badly as the rest of the country. Thus, this study aims to measure the possible effects of the minimum wage on employment in Mexico in light of the sustained increase from 2019 to 2024. To achieve this objective, two empirical strategies were employed: first, the evolution of total employment, employment by sex and fo (...truncated)