Economists get cold feet about high minimum wages

Subscribe to enjoy similar stories. IN THE BARRIO of Iztapalapa, on Mexico City’s eastern flank, the pavements stay busy even in the punishing afternoon sun. Street vendors hawk snacks from metal carts; waiters from corner taquerías weave between tables and traffic; cashiers in the ubiquitous convenience stores ring up a steady stream of small purchases.

Young adults in knock-off sportswear mingle with stooped, gap-toothed old folk. Outside a private-security firm, a sun-bleached façade is plastered with notices advertising for security guards at the legal minimum rate of 278.8 pesos ($15.20) per day. Life in Iztapalapa can be hard.

But for many workers it might have been worse without the striking recent increases in the minimum wage. Between 2014 and 2024 it doubled relative to median pay, from 37% of the middle income to 74%. It is the most extreme example of a worldwide trend, encompassing places far richer than Mexico.

Over the same period Britain has increased its minimum wage from 47% to 61% of median earnings. South Korea’s ratio has followed a similar trajectory. Germany introduced its first minimum wage in 2015; it is now worth 51% of median pay.

New Zealand’s pay floor is almost at Mexican levels, relative to its much higher incomes. America’s federal minimum wage, of $7.25 an hour, was last changed in 2009. Yet state and local legislators in Democratic areas have repeatedly raised local pay floors.

California’s is now $16.50 an hour, nearly double what it was a decade ago. In Emeryville, a small city that is home to Pixar, an animation studio, the local minimum is $19.90 an hour. All these initiatives make the federal minimum irrelevant, with less than 1% of workers across the country receiving it.