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Cablegate: Mexico Establishes Daily Minimum Wage for 2008

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DE RUEHME #0013/01 0041626
ZNR UUUUU ZZH
R 041626Z JAN 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0040
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAHLA/DEPT OF HOMELAND SECURITY
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 04 MEXICO 000013

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILCSR, WHA/MEX, USDOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON SOCI PINR PGOV MX
SUBJECT: MEXICO ESTABLISHES DAILY MINIMUM WAGE FOR 2008

REF: REF: 07 MEXICO 7042

1. SUMMARY: On Saturday December 22, Mexico,s government
announced the establishment of the country,s daily minimum
wage for 2008. Mexico,s minimum wage is set annually by a
Commission under the auspices of the GOM,s Labor Secretariat
at the end of each calendar year. This year the Commission
proposed and the GOM agreed to a 4 percent wage increase.
Mexico,s organized labor unions had wanted a 10 percent
minimum wage increase which they stated was the least amount
required to meet the basic needs of working families. In
addition to seeking a higher minimum wage, as was the case
last year, the unions also sought (unsuccessfully) reforms in
how the wage is set. The process for establishing Mexico,s
daily minimum wage has become an increasingly frustrating one
for the country,s organized labor movement and a source of
contention between it and the private sector. Mexico,s
unions see the minimum wage as a guarantee for ensuring a
basic standard of living for workers. However, Mexico,s
private sector does not believe that anyone actually works
for the minimum wage and therefore sees it more as a standard
of reference. As such the private sector, and to significant
degree the GOM, use the process of establishing a minimum
wage as a tool for combating inflation. According to the
unions and some National University (UNAM) researchers, the
minimum wage process as currently established only serve to
perpetuate widespread poverty and mass migration in Mexico.
END SUMMARY.


SETTING THE ANNUAL MINIMUM WAGE
-------------------------------

2. Mexico,s minimum wage is set annually at the beginning
of the calendar year following a series of intense
negotiations among the three elements that make up the
National Commission on Minimum Wages (CNSM); an entity under
the auspices of the GOM,s Labor Secretariat. The Commission
is composed of representatives from the GOM, the private
sector and organized labor unions. In addition to setting
the minimum wage, the CNSM is also supposed to ensure that
the wage set is sufficient to meet a Mexican family,s basic
needs. In order to do this the Commission can periodically
adjust the minimum salary throughout the year and it
publishes a monthly bulletin to officially inform the public
of the legal minimum wage.

3. In theory, and according to Mexican law, the country,s
new annual minimum wage should take effect on the first day
of a new calendar year. Moreover, the minimum wage the CNSM
ultimately announces should be based on a signed agreement
between the three parties to the Commission. In practice
agreement on a minimum wage occasionally slips into mid
January and there have been times when all parties within the
CNSM failed to agree. When that happens, the minimum wage
decreed by the CNSM is considered a suggested wage floor that
employers are expected but not legally obliged to follow.

4. Another facet of the minimum wage in Mexico is the fact
that the country actually has three minimum wages (wage A, B
and C), each determined by geographic regions. The highest
minimum wage is in urban areas designated as region A and the
lowest are in rural areas or areas with low levels of
industrialization designated as region C. The previous
presidential administration of former President Fox had
promised that it would establish a single wage region for all
of Mexico but failed to implement the legal and
administrative changes that would have made this promise a
reality. Mexico,s organized labor movement had hoped that
the current administration would establish a single minimum
wage for the entire country and had lobbied for this goal in
this year,s negotiations. Unfortunately, from the union
perspective, the other two parties to the CNSM were unwilling
to establish a single national daily minimum wage for 2008.


MINIMUN DIALY WAGE FOR 2008 INCREASED BY 4 PERCENT
--------------------------------------------- -----

5. Mexico,s organized labor sector went into the
negotiation for the 2008 daily minimum wage publicly
insisting on an increase or at least 10 percent. Privately
the labor sector hoped for a 6 percent increase and would

MEXICO 00000013 002 OF 004


probably have been happy getting five percent. The 4 percent
increase the CNSM announced for 2008 was essentially the
increase of 3.9 percent announced for 2007 (Ref). During the
negotiations for the 2007 minimum wage the unions were
unhappy with the increase the CNSM established but
reluctantly agreed to accept it as a vote of confidence in
the new administration of President Felipe Calderon which at
that time had been in office less than a month. For 2008 the
unions accepted a wage which they considered &insufficient8
and a &farce8 in order to avoid being portray as
obstructionists and because they had no choice. The GOM and
private sector elements presented the labor sector with a
take it or leave it situation and the unions felt compelled
to accept.

6. The new daily minimum wage took effect on January 1,
2008. The new minimum wage by geographic region in Mexico is
as follows: In Region A which includes areas like Mexico
City and selected parts of the states of Mexico, Baja
California, Chihuahua and Guerrero the wage is ) 52.59
(approx. USD 4.82); in Region B with areas like the cities of
Monterrey, Guadalajara, Hermosillo and Tampico, the wage is
) 50.96 (USD 4.67); while in Region C with cities like
Aguascalientes, Puebla, Oaxaca, San Luis Potosi and Zacatecas
the rate is ) 49.50 (USD 4.54).


UNIONS SEE MINIMUM WAGE PROCESS AS EXTREMELY FLAWED
--------------------------------------------- ------

7. Although Mexico,s organized labor sector felt compelled
to accept a minimum wage lower than it had hoped it did not
feel compelled to accept this wage in silence. From the
perspective of Mexico,s labor sector the minimum wage should
be adequate to meet a family,s basic needs. The unions
assert that meeting these needs is one of the main
responsibilities of the CNSM and they have been very vocal in
their criticism of the Commission,s failure to meet this
responsibility. Representatives of the Confederation of
Mexican Workers (CTM), the Mexican Electrical Workers Union
(SME) which is part of the confederation called the National
Workers Union (UNT), and the Revolutionary Confederation of
Workers and Campesinos (CROC), respectively the country,s
three largest labor federations, pointedly remarked that the
minimum wage was not a living wage. Furthermore they
questioned the utility of an entity (the CNSN) and a process
(the minimum wage negotiations) that failed so completely in
one of its main responsibilities.

8. The criticisms of these labor federations were picked up
and expanded on by several nation newspapers. These news
outlets cited studies reporting that the approximately 365
pesos a week earned by a worker in Region B (approx. USD
33.49) would not be enough to cover the basic basket of items
needed by a Mexican family. These studies relied on a basic
basket of goods established by Mexico,s central bank and the
GOM,s equivalent of the US Consumer Protection Agency which
contained ten categories of items such as edible oils,
hygiene products, meat, poultry, fruits, vegetables, eggs,
milk, etc. Using this basic basket the studies concluded
that in order to buy items from all ten categories a worker
would have to earn a minimum of 600 pesos per week (approx.
55.04).


PRIVATE SECTOR SEES CNSM AS TOOL TO FIGHT INFLATION
--------------------------------------------- ------

9. Perhaps the main reason why the CNSM is viewed as such a
failure by Mexico,s organized labor movement is that the
Commission is seen so differently by the country,s private
sector. Mexico,s private sector representatives on the CNSM
are convinced that no workers actually accept jobs paying
only the minimum wage; therefore they see no reason to try
and raise the minimum wage to a level that would cover the
cost of a basic basket of goods. What the private sector
representatives do see, and they are not really wrong in this
matter, is that over time the minimum wage has changed from a
floor for maintaining a worker,s basic standard of living
into a standard of reference that impacts all aspects of
Mexico,s economy.

10. Mexico,s minimum wage was originally established to

MEXICO 00000013 003 OF 004


provide a basic standard of living and apparently it
initially succeeded. However, an unintended consequence of
this success was that everyone knew exactly what the daily
minimum wage was. This widespread knowledge of the exact
amount of the minimum wage soon lent itself to other
unintended purposes. First job offers, then private service
fees and ultimately government fines, tax tables and a broad
range of other financial indicators were increasingly
determined by multiples of the daily minimum wage. This
practice has now become so prevalent throughout Mexican
society that a clear link can arguably be drawn between
increases in the daily minimum wage and the level of
inflation in Mexico. Consequently, the private sector
members of the CNSM see their role as that of holding the
line against inflation. The GOM,s actions on the CNSM in
consistently voting with the private sector in minimum wage
negotiations and against the labor unions, demands for
higher wages seem to imply that the government too sees the
Commission as a tool for controlling inflation.


CNSM BOTH FIGHTS INFLATION SETS REAL WAGES
------------------------------------------

11. Because of the widespread use of the official minimum
wage by both the private sector and all levels of government
in Mexico as a standard of reference it would be hard (and
probably futile) to argue that it does not have a very real
impact on inflation. What has not been very successfully
argued for some time is the proposition that for many Mexican
workers the minimum wage is their real wage. The thinking of
many in the private sector and apparently some levels of the
Mexican government is that since no one could live on the
minimum wage then clearly no one does live on the minimum
wage. Consequently, they see nothing to be gained by trying
to raise the wage to a level that would actually enable a
worker to cover the costs of the basic basket of goods and a
great deal to be lost in terms sparking inflation.

12. This perspective is now being challenge by an NGO named
the Center for Labor Investigations and Union Consultants
(CILAS) and researchers in the Faculty of Economic at the
Autonomous National University of Mexico (UNAM). According
to CILAS, some 30 million Mexicans live on 30 pesos a day,
another 20 million live on 12-22 pesos per day. CILAS argues
that many of these people are part of the working poor but
that they earn so little that in order to survive their only
options are to beg, engage in criminal activities or
immigrate.

13. A study done by the UNAM researchers which focused
mainly, but not exclusively, on workers in Mexico,s
manufacturing sector vigorously contested the CNSM argument
that few if any Mexicans actually work for the official
minimum wage. According to the researchers some 10.8 million
Mexicans work for the daily minimum wage or less. Mission
Mexico,s Labor Counselor has personally met janitorial and
retail store workers in Mexico City, and Maquiladora (foreign
owned assembly plants) in the state of Puebla who work for
only twice the daily minimum wage or less. This figure, the
researchers said, represented 23.9 percent of all working age
Mexican. Moreover, UNAM researchers added, another 9.56
million workers make only 2 times the minimum wage which at
best would be 105.18 pesos (approx. USD 9.64). Together, the
UNAM team asserted, these two groups represent 67 percent of
all working age Mexicans.


COMMENT
-------

14. The process of establishing a minimum wage in Mexico is
severely complicated by the fact the three elements who
determine the wage see the process very differently and to a
significant degree all three are right. The private sector
and the GOM see the minimum wage process, correctly it would
appear, as a tool for combating inflation. Mexico,s
organized labor sector views the process, also apparently
correctly, as a way to maintain a basic minimum standard of
living for workers. The results of these differing
perspective on the goals of establishing an official minimum
wage contributes to a process that is somewhat effective in
fighting inflation but which leave much to be desired in

MEXICO 00000013 004 OF 004


terms of providing workers with a basic standard of living
that discourage recourse to begging, crime or immigration.

Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
BASSETT

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