The discussion about the minimum salary he’s back. On the one hand, President Castillo has said that no formal worker will earn less than 1,000 soles per month, which means that, in some way, the Minimum Living Remuneration (RMV) of 930 soles will move up.
Let’s look at some numbers. First, the RMV only reaches 40% of what it was in 1970. It has improved from the low point of the early 1990s, but it is still far away (see graph). Second, the last rise in the RMV was in April 2018: from 850 to 930 soles. 3 and a half years have passed; In that period, inflation has already erased that increase of 80 soles. With the loss of several months of salary due to the pandemic, it is clear that the situation is dramatic.
The increase in the minimum wage is in the Constitution: “Minimum wages are regulated by the State with the participation of representative organizations of workers and employers” (Art. 24). This corresponds to the National Labor Council (CNT) where the government, businessmen and unions participate in a tripartite manner. But so far it is not fulfilled.
YOU CAN SEE: Government begins today the dialogue towards a real formulation of the minimum wage
And it’s been 14 years since the regime was approved in August 2007 by the CNT. A review is contemplated every two years and is based, on the one hand, on a future projection of underlying inflation (it does not consider energy and food prices, due to their high volatility); all other prices that make up the family basket are considered. And the variation in multifactor productivity (GDP, capital stock, employment and elasticities) is also considered.
But the CNT’s proposal did not crystallize into a supreme decree due to the refusal of the governments and business opposition. Therefore, the RMV is subject to political discretion. Thus, in 2014 he did not move when Mrs. Nadine heredia He said it was not on the agenda. And it rose in 2018, the same day that the resignation of PPK.
That does not happen in other countries. In Chile, it is discussed every year between the government and the unions and a technical proposal (similar to ours, which is approved by law of the National Congress) is drawn up. In Colombia there is a tripartite table for the Agreement on Labor and Salary Policies that discusses it every year. According to Law 278 of 1996, the minimum wage must be defined on December 15. The final decision is made by the President of the Republic.
YOU CAN SEE: The increase in the minimum vital remuneration could take place in the first quarter of 2022
The bottom line: every time the discussion about the RMV arises, a number of business associations and like-minded economists oppose it. The arguments are always the same: “the economy is not doing well”, “jobs are going to be lost and informality is going to be encouraged”, among others.
But they have less and less floor. Of the 193 UN countries, 160 have a minimum wage, 83%. The majority that do not have it are African countries such as Brunei, Burundi, Djibouti, Ethiopia, Rwanda and Sudan. In 28 of the 36 OECD countries there is a minimum wage and the Nordic 8 have collective bargaining agreements (the wage is not set by “the market”). Other yes. Three economists have just won the Nobel Prize for their work that shows that the belief that raising the minimum wage is undesirable because it “encourages unemployment” is false.
All this does not mean that the discussion about the pandemic is not necessary, which is contemplated in the 4 variables that would not lead to an increase in the RMV: deep recession, strong rise in the open unemployment rate, strong rise in the rate of labor informality and excessive rise in the ratio of minimum remuneration over average remuneration.
YOU CAN SEE: How much is the minimum wage in Peru and what has been its evolution in the last 20 years?
That said, Peruvian workers should not be treated as “second” or “third” category citizens. That must end. Let’s learn the lessons of neighboring countries. The government must institutionalize, through a supreme decree, the legal and technical mechanism approved in 2007.
We would like to say thanks to the writer of this write-up for this incredible material
Supreme Decree for the minimum wage