A Living Wage? LatAm’s Minimum Salaries Leave Some Short

The minimum wage in some of the region’s countries falls below the basic cost of living

What are the minimum salaries in Latin America in 2022, and what can they buy?
January 04, 2022 | 08:16 PM

Bloomberg Linea — High inflation in Latin America since the outbreak of the pandemic and other effects the health crisis has had on the economy, such as high levels of unemployment, the fall in productivity by smaller companies and the devaluation of some of the countries’ currencies against the U.S. dollar have put pressure on wage rises across the region.

Huge disparities exist from country to country, with basic foodstuffs and services easily within the reach of a Chilean worker on a minimum salary, for example, while a Venezuelan worker would require 156 minimum salaries to be able to afford the most basic items for a staple diet.

Here is the situation in eight countries of the region, including the minimum wage hikes that have taken place over the past 12 months or are planned for this year.

Argentina

Argentina’s minimum wage is currently 31,938 pesos, which at the official exchange rate is around $310. But taking the parallel (or ‘blue’) dollar as the parameter, the exchange rate of 206 pesos to the dollar, the conversion drops to $155.

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An agreement signed in 2021 established a progressive increase in the minimum wage this year, with the hike expected to bring it up to 33,000 pesos, which would mean a 52.7% year-on-year increase during 2021. There is expected to be a further salary review in March.

The cost of basic food products increased 2.6% in November, meaning a family of two adults and two school-age children would need $31,724 to remain above the poverty line, practically an entire monthly salary, according to Argentina’s statistics bureau INDEC. And for full provisions, four family members would be required to spend two salaries for a total 73,918 pesos.

Chile

From May 1, 2021, the minimum monthly wage is 337,000 pesos, or around $395.98 (taking into account an exchange rate of 851.77 pesos to the U.S. dollar, for workers aged between 18 and 65, while for those outside that age group the salary is $251,394 pesos ($295.39). According to the country’s Social Development Ministry, basic food items for one person costs 50,071 pesos, meaning a worker on the minimum wage could buy 6.7 assortments of the basic items.

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On September 1, 2020 the minimum salary was 326,500 pesos, with the increase last May having added 10,500 pesos to the monthly pay check.

Colombia

The increase in the minimum wage in Colombia for 2022 is the country’s highest in 40 years, and will be 1 million pesos (around $244.41 at an exchange rate of 4,064.83 pesos to the U.S. dollar. However, despite the record increase, the salary will remain below those of other countries of the region, such as Uruguay, which is around $406; Paraguay, with around $335, and Bolivia with $314.

The basic salary, without including transportation subsidies, will rise from 908,526 pesos in 2021 to one million in 2022, a 10.07% (91,488-peso) increase. The transportation subsidy will rise from 106,454 pesos in 2021 to 117,172 in 2022. The minimum salary with the subsidy included will rise from 1,014,980 pesos in 2021 to 1,117,172 pesos this year.

The salary was raised in 2020 by decree after Congress failed to reach an agreement by 6% to 877,805 and $980.65 with the transportation subsidy, while in 2021 the increase will be 3.5% to 908,520, and to 1,014,980 pesos with the subsidy included.

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Taking into account the basic food supply according to data from statistics bureau DANE, the current minimum salary would cover costs for two people, without taking into account other expenses such as rent or public services.

Ecuador

The minimum salary is $425 for 2022, with a $25 increase promised by President Guillermo Lasso, despite business leaders saying the technical conditions for such a raise are not in place. The increase would be the sharpest in eight years.

“That’s an additional $25. In a single year, we are making an increase equivalent to the sum of the last four years. It is the highest percentage increase in eight years,” Lasso said.

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In the last 12 years, the basic salary in the country increased by $185, rising from $240 in 2010 to $425 in 2022. The executive decided on the increase after the National Labor and Wages Council, made up of workers and employers, failed to reach an agreement in recent weeks.

Official data reveal that around 450,000 people will benefit from the increase to $425 in the country, which represents 18% of private sector workers. However, these 450,000 workers represent only 5.42% of the country’s economically active population of 8.3 million people, which is well below the 5.3 million citizens whose employment conditions are neither stable nor formal and, therefore, will not benefit from the increase.

And not counting the unemployed, who as of October 2021 numbered 384,204.

According to the country’s statistics agency, the monthly cost of basic family provisions (for four people) is $715, so at least two people would have to earn a minimum wage to be able to afford the cost of those products and services for a family.

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Read More: ‘If Minimum Wage Is like the Average Wage, Raising it Would Be Bad for Jobs’: David Card

Mexico

The minimum wage in Mexico increases from 141.7 to 172.87 pesos per day in 2022, which represents an increase of 22%, while the minimum wage for the northern border will be 260.34 pesos per day from this year.

With the general minimum wage, which is 172.87 pesos per day and 5,258.12 pesos per month, about $256 (with an exchange rate of 20.51 pesos to the U.S. dollar), people will be able to increase their consumption of some basic products, although there are also others that would practically consume the wage increase.

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The National Council for the Evaluation of Social Development Policy (CONEVAL) and the Economic Commission for Latin America and the Caribbean (ECLAC) have drawn up the basic food provisions for the country, with the former putting the price for those products at 11,291 pesos and the latter 9,172 pesos. Consequently, the minimum wage in Mexico is not enough to acquire a basic food provisions according to the standards of both institutions. In fact, according to CONEVAL’s reckoning, two minimum wages are still not enough for the basic food basket of a typical family of four.

In parallel, Bloomberg Línea offers some examples to show what the new general minimum wage will cover, based on prices as of October 2021 of CONEVAL’s basic urban food basket.

For example, in 2021 the general minimum wage was enough to buy 7.1 kilos of tortillas, in 2022 it will be enough to buy 8.6 kilos of tortillas, that is, workers will be able to buy 1.5 kilos more of that staple, as long as the price of this food remains at 19.9 pesos per kilo this year. Last year, the minimum wage was not enough to buy beef at 161.4 pesos per kilogram, but this year the minimum wage will cover that cost.

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The minimum wage was enough to buy 3.7 kilos of eggs, but after the wage increase, in 2022 a worker will be able to buy 4.5 kilos of eggs, that is, 800 grams more, as long as the price of 37.7 pesos per kilo is maintained.

In general, the minimum wage will be enough to buy more basic food products, but when it comes to buying fuels such as LP gas, the wage increase could be insufficient. In downtown Mexico City, a 20-kilogram LP gas cylinder costs around 486 pesos, so 3.4 minimum wages would be needed to buy one tank.

Panama

Panama will introduce a new minimum wage scale from the second half of January, but with increases in only some sectors of the economy. According to executive decree 74, issued by the administration of President Laurentino Cortizo, a 1.5% increase was ordered in sectors such as agriculture, fishing and livestock; a 2% increase in services and supplies, and a 5% increase in domestic services.

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However, within these activities there will be segmentations, since banana workers will receive a 13% increase in their salaries due to the fact that it is a recovering sector. As for construction and quarrying, the increase will be 1%, while it will be 2% in the energy services, urban care, financial and insurance sectors and in social and health services. Workers in sectors such as commerce, hotels, entertainment and the arts were not included in the increases.

Panama has two main regions for the minimum wage, as well as several segments. However, the range goes from $326.56 for employees of small companies to $403 for those of large companies. According to the Central American country’s consumer watchdog (ACODECO), the cost of the most basic food provisions is between $253.66 and $260.71, while the costliest is $318. In this sense, with a minimum wage, at least one basic food basket per person is guaranteed.

Read More: Grocery Stores Lock Up Their Meat in Brazil as Inflation Makes Steaks Too Pricey

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Peru

As of March 21, 2018, the minimum wage in Peru amounts to 930 soles per month, which is equivalent to approximately $233.40 with an exchange rate of 3.98 soles per dollar. The salary is currently below the minimum living wage in countries such as Panama ($268), El Salvador ($243) and Colombia ($273).

The last time the minimum wage was increased it went up by 9.4%, a move by former President Pedro Pablo Kuczynski before he resigned from office, from 850 soles (approximately $213.30) to 930 soles.

According to Peru’s statistics agency INEI, the country’s minimum wage is not enough to pay for basic provisions for a family, which would require 1,440 soles ($363.87) per month.

Venezuela

The iminimum wage in Venezuela is 10 digital bolivars, which represents $2.18 of income per month ay an exchange rate of 4.59 bolivars to the dollar, according to the official rate of the Central Bank of Venezuela (BCV). The increase was announced in May 2021, as the government of Nicolás Maduro usually does, during the celebration of Labor Day. Since then, its purchasing power in dollars (currency used by the vast majority of people amid the battered Venezuelan economy) has suffered a drop of almost 30%, as on the day of the announcement it was the equivalent of $3.54.

The minimum income authorized by the national government for a worker in Venezuela has remained between $1.50 and $3, on average, in recent years. Currently, earning $2.18 per month, a Venezuelan can buy 500 grams of ground beef pulp or a single chicken thigh. In the case of a carton of eggs, also a measure of hyperinflation in Venezuela, a Venezuelan could purchase only a dozen eggs with their entire monthly payment.

The Center for Documentation and Social Analysis of Venezuela’s Federation of Teachers put the cost of basic provisions at $340.21 for the the month of October, meaning a Venezuelan would require 156 minimum wages to buy basic foodstuffs.

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