How Latin American Minimum-Wage Hikes Compare to Inflation In 2023

The majority of the region’s economies have seen inflation begin to fall, but salaries had to be adjusted to avoid a decline in income

Image courtesy of Argentina's government.
By Bloomberg Línea
August 02, 2023 | 09:30 AM

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Bloomberg Línea — In 2022, the word inflation resounded across many Latin American countries that had already seemed to have forgotten it and price increases generated real wage losses for many workers in the region.

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In this context, at the end of last year and in the middle of this year, businesses and states raised minimum wages in a bid to recover lost purchasing power, or part of it, while monetary policy is doing its part to leave behind the inflationary hangover generated by the pandemic and the international price increases resulting from the war in Ukraine.

However, in Argentina and Venezuela, countries with consumer price index hikes of above 100% and 400%, respectively, the damage to workers’ pockets is constant and the race to counter it almost impossible.

Wage hikes and inflation

  • Bolivia: In the first half of the year, the monthly minimum wage increased by 5%, from 2,250 to 2,362 bolivars (the current value of the minimum wage is equivalent to $342). Cumulative inflation from January to June was 0.79%
  • Brazil: Since May, the minimum wage in Brazil went from 1,212 reais (a value in effect since the beginning of 2021) to 1,320 reais ($275). In other words, the increase was 8.9%, against accumulated inflation in the first half of the year of 2.87%. Year-on-year inflation in the country is 3.16%
  • In Chile, the minimum wage increased in May from 400,000 to 440,000 pesos (10%), equivalent to approximately $524. Inflation in the first half of the year was 2.1%. Chile has been progressively increasing the minimum wage: it will reach 460,000 pesos on September 1 and 500,000 on July 1, 2024. At the same time, inflation has been falling (year-on-year inflation was 7.1% in June)
  • Colombia: since January 1, Colombia has had a minimum wage of 1,160,000 pesos ($296), which implies an increase of 16% with respect to the minimum wage in 2022. Inflation in the first half of the year was 6.15%. Although the increase seems more than generous, it is consistent with the increase in domestic prices over the last year (Colombia’s year-on-year inflation to June was 12.13%, the third highest in Latin America)
  • Costa Rica: the minimum wage rose 6.62% as of January 1 to 352,164.91 colones ($647). Cumulative inflation between January and June was negative (-1.52%).
  • Ecuador: the minimum wage increased to $450 as of January 1 (5.88%). Inflation in the first half of the year was 0.87%
  • El Salvador: the minimum wage is $365 and the last increase was in 2021. This implies a deterioration in real terms, as inflation in the first half of the year was 1.1% and year-on-year inflation to June was 3.78%
  • In Guatemala, as of January 1, the minimum wage increased 7% in Guatemala City’s metropolitan area and 4% in the rest of the country’s departments. Half-yearly inflation was 1.5% and year-on-year inflation was 4.93% as of June
  • In Honduras, the minimum wage for 2023 increased 9.8%, which implies an adjustment related to inflation in 2022. Inflation for the first half of 2023 was 2.5%. The country has minimum wages by sector and company size; in this case the lowest minimum wage in all cases is taken, which is 8,134 lempiras ($331)
  • Mexico’s minimum wage has increased by 20% since the beginning of this year, bringing it to 6,310 pesos ($374). Mexico had a cumulative inflation rate of 1.37% from January to June
  • Nicaragua: Since March 1, Nicaraguan workers earning the minimum wage have seen a 10% increase. Between January and June inflation was 9.87%. Nicaragua’s minimum wage is 5,196.34 córdobas ($142).
  • In Panama, the minimum wage is $326.56 and the government announced an increase, but only for the reactivated sectors of the economy. Inflation in the first half of the year was 1.1%. However, in year-on-year terms the country has negative inflation: -0.6%
  • Paraguay: there was no increase in the minimum wage during the first half of the year. However, on July 1 the value rose 5.1% to 2,680,373 guaraníes ($369). Accumulated inflation in the first 6 months of the year was 2.2%
  • Peru: the minimum wage has been 1,025 soles ($281) since May 2022 and there have been no increases for the time being. Between January and June the country had 2.81% inflation
  • The Dominican Republic announced sharp wage increases starting in June. In the small business sector, it went from 9,500 pesos to 13,685 pesos ($243), which implied a 40% increase. Inflation in the first half of the year was 1.2% and year-on-year inflation is also low (4%)
  • Uruguay set its 2023 minimum wage at 21,107 pesos ($564), a 9% increase with respect to the 2022 minimum wage. Half-yearly inflation was 3.78% and year-on-year inflation to June was 5%
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