Effects of inflationary wage increases on jobs in the Mexican labor market

Abstract

In the international context of the largest increase in inflation in the last 40 years, the recommendations of neoclassical economics continue to be aimed at reducing demand through restrictive monetary policies and therefore oppose higher-inflation wage increases. However, this average causes serious losses in the purchasing power of families and therefore a substantial increase in working poverty. In this article we demonstrate, through a panel model, that increases in the salary level did not negatively affect formal jobs in Mexico from 1997 to 2022, quite the contrary, there is a positive and statistically significant effect. Therefore, it is concluded that it is advisable to carry out policies that promote an inflationary salary increase that avoids the degradation of the living conditions of the working class.