The discussion on the minimum wage for 2025 is divided into two phases: one is the collection of inputs and the other is the discussion, analysis and proposal of the sectors in the joint committees, which must submit their report to the National Salary Commission (CNS), which also issues its own report.
This year, the input phase is expected to end this month and the discussion in the collective bargaining committees will take place between August and September so that they can submit their report to the CNS during the second half of that month, according to this entity.
In mid-November, the final report will be delivered to the Minister of Labor, Miriam Roquel, and later to President Bernardo Arévalo. The new salary should come into effect on January 1.
Currently, sectors and analysts are beginning to mention the indicators or figures that should be taken into account to set the new minimum wage. But given the existence of a new basic food basket (CBA) implemented by the National Institute of Statistics (INE) starting in January 2024, this could focus much of the discussion.
Although there are different opinions about which indicators or aspects should be considered, depending on the perspective of each sector, the following are mentioned: basic basket, inflation, productivity and gross domestic product (GDP) per capita, population growth and cost of living, factors that each sector raises from its perspective.
What the sectors say
The three sectors that analyze the salary issue within the joint committees and the CNS are the employers’ association, the labor association and the government.
Guido Ricci is a representative of the employers’ sector in the CNS and believes that it is still premature to talk about what could be approved because even the sector he represents has not yet analyzed a position, which would be done in September.
Regarding what the use of the new basic food basket may represent for setting the minimum wage, Ricci said that it will be one more input like others used to analyze it. Although he clarified that the sector has always defended the need to look at both the possibilities of the workers and those of the companies.
“In addition, we must work on creating conditions to bring more employment to the formal sector, since at present the minimum wage is set only for 20% or 30% of the segment in the formal sector, but informality remains very high.”
He then suggests setting wages based on real income, so the discussion should focus on what to do to ensure that minimum wage attracts as many workers as possible to the formal sector.
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Regarding other indicators, Ricci indicated that they have not yet defined a proposal, but there is a formula from the International Labor Organization (ILO) that mentions projected inflation, economic growth and the possibilities of companies to offer decent wages to generate more formalization throughout the country.
Alejandro Ceballos, also a representative of the employers’ sector in CNS and a member of the clothing and textiles area, said that according to what was observed in the CNS meetings, much of the discussion could revolve around the basic food basket, but he says that it is necessary to take into account inflation by sector and not just the general one because some are being affected by the increases more than others, as they do not depend on the same supply chain.
For example, one of the problems he mentioned is the road infrastructure that is affecting production and cargo transportation operations, in addition to the international rise in container shipping and shipping services.
“It affects us (as a clothing and textiles sector) a lot because costs have gone up, but product prices have not because the United States is almost in a recession and demand has decreased. So it is a complicated scenario,” he said.
Francisco Mendoza, representative of the labor sector in the CNS, said that regarding the new calculation of the basic food basket, the sector is also asking the INE to explain where the new formula for calculating it comes from, what it consists of, and the nutritional criteria.
Although the basic basket, being a new model, could be central to the discussion for the minimum wage in 2025, Mendoza explained that the parameter should be the real cost of what is found in markets and supermarkets for both baskets.
“We are concerned because regardless of what the executives’ analysis is, the reality for people with prices and salaries is that they cannot afford to buy the products and services they need.”
Regarding the main points of the discussion, he believes that the employers’ sector will insist that the salary adjustment be based on inflation, which would represent an increase of only 3%.
But as a labour sector, they will insist on an adjustment to level incomes with the costs of the food basket and the extended basket. They also insist that there should not be differentiated salaries as there are currently, but only one for all activities.
“If the basic food basket models that we asked to be explained work for us, we could analyze it as an indicator, but the labor sector focuses more on the cost of living. In addition, there is the context and the national sociopolitical and economic situation,” said the representative.
According to Mendoza, the ILO said that it has not been proven that increasing wages leads to company closures or loss of jobs, which is the constant position of the employers’ sector and think tanks.
Meanwhile, the president of the CNS, Alain Samayoa Chavarría, explained that they are still in the first phase of the work, which consists of listening to various entities to obtain input and carry out a preliminary analysis.
And in September the salary discussion will begin, first by the joint committees and then in the CNS. Therefore, they expect that in the second half of September the report of these will be transmitted. The CNS has scheduled the last meeting for November 15 to specify the positions and the ruling.
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Asked about the criteria or indicators to use to set the minimum wage and whether the new basic food basket could be part of the central discussion, Samayoa said that there are several aspects that could be crucial, and he said that beyond the basic basket, the purchasing power of the population is also very important.
“The monetary value of a salary can be higher than its numerical value, and beyond the basic basket we have to focus on the purchasing power of the salary. For example, in 2017 this was much higher than now, even though the salary was lower,” he explained.
Wage market and GDP per capita
Taking into account that, based on the experience of previous years, the minimum wage does not meet the expectations of covering the costs of the baskets of expenses, analysts Paul Boteo, from the Freedom and Development Foundation, and Luis Linares, from the Association of Research and Social Studies (Asíes), were consulted on what should be done in this regard.
Boteo explained that unfortunately there is a reality that must be accepted and that is that salaries in Guatemala are low, but he mentions that it is important to analyze the reasons: there is a large supply of labor, but relatively little demand, apart from the fact that the GDP per capita in the country is around US$5,800 per year, which puts a low ceiling on the capacity for growth in wages.
And therefore, “no matter how much we try to raise wages, we cannot do so drastically if we cannot increase productivity.”
He says that there may be a gap between the minimum wage and the basket of expenses, but that the salary cannot just be raised by decree because there is an economic reality that must weigh productivity, the economy and inflation.
He explained that Guatemala’s minimum wage is already among the highest in Latin America, but the GDP per capita is one of the lowest in the region and “therefore there is no correspondence between personal income and minimum wage. Raising it by decree would continue to fuel that trend.”
Guatemala has the fifth-highest minimum wage in Latin America and the fifth-lowest GDP per capita in the region, he said, citing data from Bloomberg and the World Bank.
The data collection mentions that the country has a minimum wage of Q3,266 in 2024 (which refers to the one in force for agricultural activity in economic district 1, department of Guatemala). But now there are six different minimum wages, and to those amounts a bonus of Q250 must be added.
Asked about the influence that the average cost of the new basic food basket may have, Boteo said that it can give an indication of how far expenses may be from income, but “it cannot be a reference instrument for the minimum wage. This is determined by various factors, but the reality is that it is low because we have a depressed labor market in general, although not in relation to the region.”
Change basket, gradual increases and other elements
Regarding the basic food basket, Linares believes that the government should ask the INE to review this modality since, in his opinion, the average cost of the basket is excessively low.
According to the institution, only around Q850 per month is required for the basic food of a person in rural areas and around Q650 in urban areas, he said, mentioning that around Q200 per week is spent on fruits and vegetables alone, without taking into account other products such as chicken, meat, corn, rice, beans and tortillas, among others.
According to Linares, the previous government had the intention of lowering the amount of the basket to the minimum in order to look good to employers and justify that it was not necessary to increase the minimum wage.
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Regarding the indicators, Linares indicated that it must be taken into account that the needs of a worker’s family do not only consist of food, but also education, clothing, health, transportation and others, in addition to the fact that it is often said that with two people working in the home the cost of the basket is greatly exceeded, but many households are made up of single mothers or only one member can work.
“The main factors to consider are the needs of workers and their families, as well as the possibilities of companies, expected inflation and increased productivity.”
Nor can we expect a salary increase “all at once” to meet the cost of the food basket and goods and services, but the goal should be to gradually reduce the gap with sustained gradual increases and protect real wages, that is, purchasing power, he explains.
Regarding the amount to be set for 2025, the Asíes analyst expects that it will break with the pattern of recent years regarding a lack of agreements between the labor and employer sectors, in addition to requiring a proactive attitude from the government sector.
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