Determination of the minimum wage for 2022 based on the unemployment rate and its comparison with inflationary conditions

Abstract

The pandemic crisis has been altering key economic variables, such as the unemployment and inflation rates. In this paper, an analysis of minimum wage projections for 2022 is conducted based on unemployment, inflation and minimum wage levels, according to INEGI. First, using the bivariate normal distribution, it is shown that the unemployment rate could reach lower rates than the 4.08% reported in July 2021; based on this, a relationship between the minimum wage level and the unemployment rate is estimated before and after this threshold. It is found that, if an increase in the level of the minimum wage could be possible by December, this would be achieved if unemployment were lower than 4.08%. In addition, the inflation and minimum wage results are shown, concluding in both scenarios that increases in the minimum wage could be expected between 20% and 28% over the 141 pesos reported at the beginning of this year.
Keywords: Minimum wage, inflation, unemployment, forecast.