The Dilemma of Productivity: Criterion for Minimum Wage of $2,155,000 Would Have a Conceptual Error
The minimum wage for 2026 will be a living minimum wage. Photo: Private Archive
TL;DR
- The 23% minimum wage increase for 2026 is being challenged after a temporary suspension by the Council of State.
- The government's use of the 'living wage' concept for the first time in setting the minimum wage has caused controversy.
- Supporters of the increase argue that the minimum wage has historically grown less than labor productivity, and the 'living wage' concept aims to rectify this.
- Economist Daniel Ossa argues that closing the wage-productivity gap is a valid criterion for wage adjustments, based on OECD data.
- Critics, including economists José Pulido and Mateo Castaño, claim Ossa's calculations contain a 'conceptual error' by comparing hourly productivity (OECD) with a monthly minimum wage.
- Pulido suggests comparing productivity per worker with the minimum wage or hourly productivity with the real hourly minimum wage for a fair comparison.
- Castaño criticizes the confusion between Total Factor Productivity (TFP) and labor productivity, stating that wage increases should be anchored to TFP, not labor productivity.