Mexico - January 2026

Mexico’s President Claudia Sheinbaum has announced a further increase to the minimum wage for 2026 as part of a continued overhaul of labour laws, which also includes plans to reduce the length of the working week.

The government announced an increase to the minimum wage at the beginning of December, with a 13% increase set to raise the general minimum daily wage from M$278.80 (US$15.64) to M$315.04, while workers in the northern border free zone (ZLFN) will get a 5% raise from M$419.88 to M$440.87. Sheinbaum argued that the recent increases in the minimum wage have helped to reduce poverty, with government figures showing that 6.6m had been lifted out of poverty as a result. This has been necessary due to limited increases in the minimum wage under governments prior to Sheinbaum’s predecessor, Andrés Manuel López Obrador (2018-2024), which resulted in the sustained loss of purchasing power for Mexican families, according to Sheinbaum.

• Purchasing power

From a peak in 1977, the purchasing power of the minimum wage suffered a sharp fall following the oil crisis which started in 1982 and was further hit during an ensuing period of extremely high inflation, and successive governments during the 1990s and 2000s did little to address the issue. 

The increase is part of ongoing efforts to increase purchasing power for Mexican families and cover the cost of 2.5 so-called basic food baskets by 2030 – when Sheinbaum’s term is due to end. This latest move will take that ratio to 1.8 basic food baskets, with progress towards the ultimate goal, the product of a new economic model introduced by the ruling Movimiento Regeneración Nacional (Morena) party, which aims to fight corruption and more fairly distribute wealth, she added. Sheinbaum also said that these efforts haven’t driven inflation, as critics had argued that they would, adding that this latest decision would also avoid stoking inflation as it was the result of a consultation with the central bank (Banxico) and the private sector.

Her claims are backed up by conditional support for the move from key business lobbies. For example, the Confederación Patronal de la República Mexicana (Coparmex) business association said it supports minimum wage increases. However, it also said that there are limits to how high it can go without putting pressure on formal jobs, competitiveness, and the continued viability of small businesses. The Coparmex president, Juan José Sierra, said that it will be “essential to monitor the labour market, inflation, and economic growth to evaluate the case for wage increases each year and to guarantee stability for businesses and formal employment”.

For Octavio de la Torre, president of the national chamber of commerce, services and tourism (Concanaco Servytur), the increase is a move in the “right direction”. However, he called for financial support from the state in order to sustain formal jobs and prevent layoffs. “A labour reform without subsidies could end up hurting those that we need to protect the most: family-owned businesses,” he said. Manufacturing industry lobby Canacintra echoed these concerns, with its president, María de Lourdes Medina, claiming that small businesses will find it “much more difficult” to pay these higher wages.

And Sofíá Ramírez, director of the México ¿Cómo vamos? (MCV) thinktank, told local media outlet El Economista that issues with maintaining or generating formal jobs could arise if sales, revenue, or productivity don’t increase in line with the minimum wage. Improving productivity, which has been stagnant since 2009, would enable further increases to the minimum wage while avoiding negative effects, said Ramírez, who added that more incentives are needed to encourage small businesses to enter or remain in the formal economy.

Analysts at private bank Banamex concur that the minimum wage may be approaching the limit at which further increases would have “adverse effects” on formal jobs. “Growth in the minimum wage increases the cost burden for businesses due to stagnant productivity, disincentivising the creation of formal jobs,” said the bank in a recent report. The rapid recent increases have made it “increasingly more difficult for businesses to absorb additional costs,” it added, encouraging them to hire workers off the books to reduce these costs.

And in a December report, the International Labour Organization (ILO) highlights the fact that the purchasing power of the minimum wage has increased 160% since 2018, the largest increase in Latin America and the Caribbean, while underlining that productivity and labour participation must also increase at the same time in order to make higher wages sustainable. Unfortunately for Mexico, both the labour participation rate and the employment rate have fallen from Q1 2024 to Q1 2025, likely due to a slowdown in economic growth, which limits the capacity to generate new jobs, added the ILO.

In addition, Banxico deputy governor Jonathan Heath, has voiced concerns that if the minimum wage continues to increase and approaches the level of the median salary, it could in fact increase inflation. A minimum wage that moves ever closer to the median salary would also encourage unions and those workers on higher wages to agitate for pay rises, increasing the risk of labour unrest and associated disruptions to economic activity, as well as risking an increase in inflation if demands for higher pay are met.

Although Sheinbaum has pointed to the continuation of an agreement with the private sector designed to stop the price of a basic basket of goods from increasing in the next six months, known as the package against inflation and high prices (Pacic), there appear to be widespread concerns that minimum wage increases could start to become a problem without productivity gains and strong economic growth. Mexico is also facing other inflationary pressures, such as the introduction of tariffs on imports from nations, predominantly in Asia, with which the country doesn’t have a free trade deal, which could drive up prices of imported goods as well as domestically- manufactured products that rely on imported inputs.

And increasing the minimum wage is not the only way that Sheinbaum is shaking up Mexico’s labour landscape. The president has also revealed plans to reduce the working week from 48 hours to 40 by 2030, in a further bid to help workers. The reduction was first proposed in 2022 under López Obrador and will be gradually introduced from 2027 onwards. It has proven controversial with the private sector, with business associations such as Coparmex warning that it could make generating jobs and attracting investment more difficult at a time when Mexican businesses are already facing heightened uncertainty due to US President Donald Trump’s tariff policies and the renegotiation of the US-Mexico-Canada trade agreement (USMCA). It will also add to compliance costs, requiring mandatory logging of working hours, and Coparmex has warned that shorter working hours will engender weaker economic performance without efforts to boost productivity, such as investment in technology and training.

In conclusion, Mexican businesses face considerable uncertainty due to both Sheinbaum’s policies and the shifting global trade environment. While the Morena government attributes its strong record on poverty reduction to the substantial increases in the minimum wage, and a shorter working week will also benefit workers on paper, the policies may lead to layoffs and a greater reliance on informal employment as companies struggle to deal with increasing labour costs at the same time as various economic headwinds. If these fears are realised, it will reduce the net benefit of these policies to Mexican workers as those who are forced into informal work will lose access to social protections, and the cost of paying for the equivalent to these benefits out of pocket will likely outweigh any increase in the minimum wage. 

Uncertainty

Rodolfo de la Torre, an economist and independent consultant, told El Economista it was difficult to predict the effects of the latest minimum wage increase on inflation, employment, and informality. “What this means is that it is going ahead without the certainty that there won’t be any adverse effects on these three economic factors,” he said.