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Changes to Mexican labor law took effect this year. As a result, the minimum wage increased substantially, and the amount of paid vacation time due an employee was modified. Mexico remains a source for low and stable labor costs for global manufacturers. But the country has experienced a populist reform of labor laws under current President Obrador.
Since 2019, and partially due to changes made to NAFTA in the new USMCA, Mexican labor laws have undergone substantial reform. The county has a clouded history with labor relations, dating back hundreds of years. Until recently, Mexico’s labor unions served little more than to rubber stamp most of the mandates enacted by government and big business alike.
When Manuel Obrador came to power as Mexico’s new president in 2018, he ushered in an era of reforms and populist sentiment regarding the relationship between labor and business. For the first time in decades, labor unions are no longer sock puppets for the employers. Employees are guaranteed certain benefits and rights, such as a reasonable minimum wage, ample vacation time, etc. And to strengthen the formal economy, companies are no longer allowed to outsource, but must keep all roles directly related to corporate mission and goals in house.
Additional provisions to come out of this era were:
The majority of these reforms in Mexican labor laws took place in the first couple of years after President Obrador came to power. However, in 2023, a couple new labor laws went into effect, one of which is a substantial minimum wage hike.
Due to the ongoing and historic level of inflation in the country, Mexico sought to prevent the labor shortages seen in the US by raising the minimum wage 20%. Along the border, the new minimum wage is $312.41 pesos per day. In the rest of the country, the new daily minimum wage is $207.44 pesos – a full 20% higher in each case than the previous year.
Nevertheless, Mexico’s labor costs remain among the lowest in the developed world and continue attracting new manufacturing investment from around the world. At current exchange rates, these new minimums equate to about $16.50 USD and $11 USD respectively. But for a country with low-to-moderate growth in wages, these changes come as a welcome change for workers in low-skill positions.
Still, the move came only after a lengthy process of multiple years to decouple the minimum wage from many other official prices like speeding fines and mortgages, which were determined as multiples of the minimum wage. And a government study was necessary to determine the impact such a change would have on hiring, future wages, and employment.
Mexico also changed their paid vacation time, which is governed by federal law. The new law went into effect in 2023 and effectively doubles the minimum paid vacation time required for all employees from six days to 12.
According to the new table, all employees who have been employed for at least a year are given a minimum of six days paid vacation. This must be available to them within the six months following their first anniversary of hiring.
After the first year, this number of days increases each year by two days until the 6th year, when the number increases every five years by two days. So, an employee with five years of service will have 20 days, and this minimum increases until the 31st year, in which that employee will have 32 days.
Under the new law, all employees employed for at least a year are guaranteed a minimum continuous paid vacation of 12 days.
Mexico continues to evolve and grow as one of the world’s primary manufacturing destinations. And these reforms to Mexican labor law are intended to foster a continued atmosphere for profitable employment in the formal economy. Manufacturers in all parts of the globe will find a willing and able workforce ready to produce their products at an affordable rate.