Minimum wage in Peru: what factors should be considered for its increase?

The last increase in the minimum vital remuneration (RMV) occurred in May 2022, during the government of former president Pedro Castillo. In this period, the basic salary went from S/930 to S/1,025, suffering a slight increase of S/95 that remains to this day and has not been able to have a consensus formula in the National Labor Council for its technical review.

This space that brings together representatives of the State, employers and workers has yet to move towards an institutionalized policy for setting the RMV that is supported by technical criteria and social dialogue. To address this issue mentioned on many occasions by government officials, La República spoke with economists and union representatives about it.

Is it appropriate to raise the minimum wage for 2024?

According to the economist and professor at the National University of Engineering (UNI), Catherine Eyzaguirre, it is a constitutional responsibility of the Peruvian Government. guarantee adequate income for workers, so that they can cover their basic needs and improve their purchasing power amid the rising cost of living.

“One of the measures to improve the living conditions of Peruvians is the increase in the minimum living wage, but we are also aware that the universe of workers who will be influenced by this type of policy is small. However, it is a sign important market that would allow the economy to continue advancing in a healthy way, generating greater consumption capacity and a better increase in the productivity of companies,” he maintains.

For his part, Diego Macera, from the Peruvian Institute of Economics (IPE), points out that it is necessary to direct the discussion of the increase in the minimum living wage with progress towards institutionalization so that this income is more predictable, both in opportunity and quantity. “It is necessary to standardize more when the RMV is going to be raised and to what extent, instead of the discussion being a response to political situations.”.

Minimum wage in Peru: what factors should be considered for its increase?

Julio César Bazán, president of the Unitary Central of Workers of Peru, explains that there are three factors to increase the minimum vital remuneration: existing difference with the basic family basket, the increase in inflation and the evaluation of the increase in productivitytaking into account the incorporation of new technologies.

In this regard, it is important to mention that since 2007 there has been a technical review mechanism in the National Labor Council so that the percentage increases in the RMV in a given year are equivalent to the sum of inflation and the percentage change in average labor productivity in the previous year.

“While salaries remain below the pre-pandemic context, the cost of living has increased. So, inflation is a very important factor to take into account and added to this, as the technical proposal mentions, productivity must be included of the workers, since if they have more money in their pockets, a context of economic reactivation is generated that we need”explains Catherine Eyzaguirre.

From the other side, Diego Macera states that the formula for updating the minimum wage proposed by the National Labor Council presumes that the current level of the RMV is the correct one and that it should only be adjusted for inflation and productivity, which is not necessarily TRUE.

“The current level of the minimum vital remuneration is approximately 75% of the average remuneration. In the standard suggested by the OECD it is 50%. This suggests that the current level of the RMV is already an impediment in companies, probably smaller, to try to have more workers hired. Then, once we determine the appropriate level, we can decide whether to raise it or not,” he says.

Increase in the minimum wage: when would the debate be resumed in the National Labor Council?

According to Julio César Bazán, from the CUT, the last session of the National Council of Labor and Employment Promotion (CNTPE) was held on Thursday, February 29, to analyze the requests of government representatives, workers and businessmen; as well as forming an ad hoc commission to review the rules and guarantee periodic meetings of this body that discusses the country’s labor policies, but which does not have binding resolution mechanisms.

“There was a last meeting in February, which unfortunately could not be completed. We, when we intervened on behalf of the workers, pointed out the need for a gesture to advance the CNTPE was to comply with the agreements adopted at the CXI International Conference of the ILO, in which the status of compliance with Compliance Convention 187 on freedom of association in Peru was evaluated. However, the businessmen opposed it and the Government took their side. Finally, we had to withdraw and, since then, no other session has been called.”

Although the Minister of Labor and Employment Promotion, Daniel Maurate, reports the existence of a commitment by President Dina Boluarte to raise the RMV, this issue is not a priority on the CNTPE agenda.

“We did not do it last year, because the economy entered a recession, and in a recession situation it is not advisable to increase the minimum wage. The outlook is very favorable for this year. “Hopefully we will have that announcement by July 28 (National Holidays), but it depends on how the economic recovery goes.”he said in recent statements.

In addition to Maurate, another of the ministers who has spoken recently is the head of Economy and Finance, José Arista, who considers it premature to debate the minimum wage, despite recognizing an improvement in the country’s economic indicators.

“I think this is not the time to talk about that. We have 30% formal economy and 70% informality; indicators of economic reactivation have been noted, but the truth is that I think that at the end of the second semester we should be evaluating that alternative, once the economic reactivation of the country has been consolidated,” he told the media.