2021 marks twelve years since the last time the United States raised its federal minimum wage. It might sound like a reasonable amount of time, but compared to how often Mexico and Canada have raised their minimum wage, it is not. Mexico has been raising its minimum every year since 2016. Canada does not have a federal minimum wage, but in many of its provinces, they already have a higher minimum wage than the United States. This prompts the question: Have Mexico and Canada been more progressive than the United States regarding minimum wages? This article will elaborate on whether there is a measurable and comparable difference in each country’s minimum wage and a living wage for its citizens. Economists have concluded that there are factors such as violence rates, inequality gaps, and global pandemics that need to be taken into consideration to fully understand a country’s situation to determine whether raising their minimum wage is beneficial. In some instances, economists see job growth when a country raises its minimum wage, and in others, it may cause inflation. Ultimately raising the minimum wage leads to diminishing the gap between the minimum wage and a living wage. Therefore, even though there are some factors that need to be taken into consideration, I argue that Mexico and Canada have been more effective in raising their minimum wage leading to a reasonable living wage for their citizens.
To better comprehend this argument, it is worth noting the difference between a minimum wage and a living wage. A minimum wage is the lowest wage that employers can legally pay their employees.1 On the other hand, a living wage is what is deemed to be the minimum income necessary to attain basic needs and live comfortably.2 These two wages don’t always coincide, given the fact that usually a living wage is higher than the legal minimum wage. The current median living wage across the United States is approximately $67,690, which turns out to be $32/hour in a full-time job.3 Meanwhile, the actual earnings of a full-time minimum-wage employee come to $15,080 yearly, or $7.25/hour.4 The minimum wage is equivalent to only 22.7% of what the US living wage is yearly. This is an issue because there is a severe gap between the living wage and the actual minimum wage for citizens in the United States. The disparity between the minimum wage and a living wage has led to about 13 million U.S. workers having more than one job.5 Even with two full-time minimum wage jobs, it is not enough money to reach the living wage quota, which is why the United States should raise their minimum wage to meet the expectations of its living wage.
The benefits of raising the minimum wage usually outweigh the drawbacks, and this is evident in Mexico’s case. Mexico has greatly benefited from raising its minimum wage every year since 2016.6 Mexico had a 16% increase in its minimum wage in 2019, 20% in 2020, and a 6% in 2021 pointing towards a progressive establishment. At the beginning of 2020, it was predicted by Mexican officials that the salary increases would benefit 3.4 million Mexican citizens.7 This elaborate argument is structured from how well Mexico did when they raised their minimum wage in 2019, because the inflation rate fell from 4.8% to 3% and there was strong consumer demand.8 With a propelling economy, Mexico’s government created competition in the job market with the United States with their “border zone.” The border zone, which was introduced in 2019, was created with the intent to raise the minimum wage in certain municipalities across the northern border to prevent Mexican workers from moving to the United States for a job.9 The United States has been deficient compared to Mexico’s progressive reforms regarding the economy and job competition and will continue to play catch-up if they don’t respond adequately to the situation.
The current median of a living wage in Mexico is approximately $3,780.09 yearly or $1.81/hour.10 Mexico’s current minimum wage is $0.84/hour.11 This turns out to be approximately $1,753.00 USD yearly.12 The percentage of Mexico’s minimum wage is 46.37% of their living wage, which is significantly better than in the United States. This is because Mexico is almost halfway to having a balanced living and minimum wage while the United States is barely at 22.7%. Even though Mexico seems to be making significant structural changes to their economy, they still face a variety of factors that obstruct the completion of their agenda. The ongoing pandemic, an inequality gap, and homicides are key factors in understanding Mexico’s feeble standing because they have cost Mexico plenty of investments and fear of a rise in unemployment, which has warped the results of how the rise in the minimum wage has impacted Mexican citizens.13 However, it is safe to say that Mexico has been more progressive than the United States because they are slowly but surely diminishing the gap between a living wage and the minimum wage.
On certain occasions, raising the minimum wage may not always be beneficial to a country’s economy. The latter is based on the argument that raising the minimum wage leads to an increase in the prices of goods and services resulting in inflation, and the more employers need to pay their employees, they tend to hire less, hence job losses.14 This was the case for certain provinces in Canada with the decline of job opportunities for people from the ages of 15-24. Yet, economists have not been able to correlate precisely the job losses with the increase in the minimum wage, because the jobs lost in Canada were either from the wholesale or retail industry, which brings the factor of technological advances into play. Economists and analysts also argue that another key factor for job losses in Canada was the implementation of self-checkout machines in grocery stores and the demand to speed up automation, and not necessarily the increase in the minimum wage.15 Apart from that, Ontario actually saw a 2.4% job growth in 2018 when it raised its minimum wage. This brings into question whether the job losses in certain Canadian provinces were actually caused by the rise in minimum wage or technological advances.
According to most Canadian citizens, $26,845.41 yearly is a good amount of money to live comfortably in Canada.16 Since there is no federal minimum wage, each province has the ability to determine its own regulation. So, for the sake of the argument, Ontario’s minimum wage will be used. Ontario has a minimum wage of $11.25/hour or $24,437.28 yearly.17 This results in Canada’s minimum wage being 91.03% of its living wage, the closest to equilibrium out of all the countries discussed in this article.
All in all, Mexico and Canada’s minimum wages are significantly closer to their living wage than in the United States. This proves that Mexico and Canada have been more progressive in regards to the living wages in their country because they provide a more reasonable minimum wage that complies with their living wage. Mexico’s minimum wage is 46.37% of its living wage and Canada’s is 91.03% of its living wage. In contrast, the United States minimum wage is only 22.7% of its living wage, demonstrating that raising the minimum wage does in fact aid in minimizing the gap between a living and minimum wage. There are certain factors that need to be taken into consideration to fully comprehend the situation a country may be faced with, but the United States should raise its minimum wage to satisfy the living wage in its country. Raising the minimum wage in the United States would bring a better living to its citizens. Hence, even though there are some factors that need to be taken into consideration, Mexico and Canada have been more effective in raising their minimum wage leading to a reasonable living wage for their citizens.
- “Definition of MINIMUM WAGE,” accessed May 10, 2021, https://www.merriam-webster.com/dictionary/minimum+wage. ↵
- “About Living Wage,” Just Economics (blog), accessed May 10, 2021, https://www.justeconomicswnc.org/issues/living-wage/about-living-wage/. ↵
- Taylor Borden and Davis Dominic-Madori, “How Much Money You Need to Make to Live Comfortably in Every State in America,” March 10, 2021, Business Insider, https://www.businessinsider.com/living-wage-income-to-live-comfortably-in-every-us-state. ↵
- “What Are the Annual Earnings for a Full-Time Minimum Wage Worker?,” Center for Poverty and Inequality Research, accessed May 7, 2021, https://poverty.ucdavis.edu/faq/what-are-annual-earnings-full-time-minimum-wage-worker. ↵
- US Census Bureau, “About 13M U.S. Workers Have More Than One Job,” United States Census Bureau, accessed May 7, 2021, https://www.census.gov/library/stories/2019/06/about-thirteen-million-united-states-workers-have-more-than-one-job.html. ↵
- “UMA,” Inegi.org accessed March 22, 2021, https://www.inegi.org.mx/temas/uma/. ↵
- Mary Beth Sheridan and David Agren, “Mexico Is Giving Millions of Workers a Historic Pay Increase. But Will It Have many effects?,” Washington Post, accessed March 22, 2021, https://www.washingtonpost.com/world/the_americas/mexico-is-giving-millions-of-workers-a-historic-pay-increase-but-will-it-have-much-effect/2020/01/01/9f18db56-28d4-11ea-9cc9-e19cfbc87e51_story.html. ↵
- Juan Pablo Spinetto, Nacha Cattan, and Eric Martin, “Mexico Will Soon Boost Its Minimum Wage by 20%. It’s Still Less than $1 an Hour,” Los Angeles Times, December 18, 2019, https://www.latimes.com/business/story/2019-12-18/mexico-minimum-wage-increase. ↵
- “Mexico’s Minimum Wage in 2020,” Mexperience, January 6, 2020, https://www.mexperience.com/mexicos-minimum-wage-2020/. ↵
- “Mexico’s Cost of Living vs Income – How Do They Do It?,” BajaInsider.com, May 20, 2016, http://www.bajainsider.com/article/mexicos-cost-living-vs-income-how-do-they-do-it. ↵
- “Mexico’s Minimum Wage in 2021,” Mexperience, January 4, 2021, https://www.mexperience.com/mexicos-minimum-wage-2021/. ↵
- “Mexico Minimum Wage – World Minimum Wage Rates 2021,” accessed May 9, 2021, https://www.minimum-wage.org/international/mexico. ↵
- Mariana Campero, “The Covid-19 Pandemic Threatens Mexico’s Economy,” CSIS, accessed March 22, 2021, https://www.csis.org/analysis/covid-19-pandemic-threatens-mexicos-economy. ↵
- Adam Hayes, “Does Raising the Minimum Wage Increase Inflation?,” Investopedia, accessed May 10, 2021, https://www.investopedia.com/ask/answers/052815/does-raising-minimum-wage-increase-inflation.asp. ↵
- “Did Ontario’s Minimum Wage Hike Kill Jobs? Here’s What The Data Says,” HuffPost Canada, February 9, 2019, https://www.huffingtonpost.ca/2019/02/09/ontario-minimum-wage-impact_a_23665531/. ↵
- “The Average Cost of Living in Ontario in 2021,” Canada Buzz, March 12, 2020, https://canadabuzz.ca/the-average-cost-of-living-in-ontario-in-2020/. ↵
- “Minimum Wage in Canada by Province (2021),” Savvy New Canadians, December 28, 2020, https://www.savvynewcanadians.com/minimum-wage-canada/. ↵