Publications

The debate over the taxation of the minimum wage under Personal Income Tax has been raging relevant in recent months, mainly over two concerns that have fueled the discussion.

The Senate of the Republic approved a resolution mandating that minimum wages be adjusted annually, at least in line with inflation, to prevent the loss of purchasing power and benefit low-income workers.

At this time, talks on the minimum wage increase for the year 2024 have already begun and this decision affects formal workers directly and indirectly all workers, as the minimum wage is fundamental to the country's economy

The Mexican economy has shown better performance than expected, partly explained by the labor market's strength. According to the National Survey of Household Income and Expenditure (ENIGH), job creation and wage improvements have been more relevant for household income than government transfers.

Increases in the national minimum wage (SMI) are excellent news in economies in which productivity is growing and employment rates are high. However, there needs to be an awareness of the costs and benefits of the measure, which regrettably are still not being evaluated with the necessary detail and rigor.

The minimum wage policy has been insufficient to attack the structural problems of the labor market. It has eclipsed the need to discuss more structural aspects of the economy that allow for a more robust labor market and a horizon for creating jobs with better remuneration.

On June 7, 2022, the European Parliament and EU Member States reached an agreement on the Directive on adequate minimum wages. Despite the arrival of this Directive, differences in minimum wages between EU Member States will continue to exist for as long as there is no convergence in productivity and employment rates.

Now that the minimum wage approaches the target level of 60% of the average salary, we need to rethink employment and training policies. If we don’t, the unemployment rate, investment and productivity growth could all take a hit.