The Minimum Wage Impact on Poverty in Mexico

This study contributes to the public debate on the effect of the minimum wage on poverty and provides the first estimate specifically for the impact of the minimum wage on multidimensional poverty in Mexico. We find that the elasticity of poverty to the minimum wage is between − 0.36 and − 0.58. This implies that between 2019 and 2022, the number of people in poverty decreased between 23.7% and 37.6% because of the minimum wage. In other words, of the 5.1 million people who escaped poverty, 4.1 million can be attributed exclusively to the minimum wage increase. Additional results indicate that minimum wage increases did not significantly impact the level of employment but did have an impact on labor income. As for social programs, the universal pension shows that a 10% increase in its funding reduces poverty by 13%; a 10% increase in basic education scholarships income contributes to a 3.5% reduction in income poverty.