Job guarantee and wage policy to reduce poverty in Mexico

Abstract

Because the labor market in southwest Mexico is very different from that in the north, a given wage policy may affect the two markets quite differently. It is shown that the southwest's high level of labor informality will not only prevent a minimum-wage increase from addressing that region's high level of poverty effectively, but will actually worsen Mexico's unequal territorial distribution of income. Therefore, we maintain that, under the current conditions of the country's labor market, saying that the existing policy of increasing the minimum wage will reduce both poverty and inequality amounts to a contradictio in adiecto. Such a policy will continue to be self-contradictory until it considers implementing, as well, a job guarantee policy.