Peruvians Approve of Hike in Minimum Wage but Agree to its Impact on PyMEs

By April 26, 2018

After Peru’s President Pedro Pablo Kuczynski announced that he had asked Labor Minister, Javier Barreda, to request the National Work Council for an evaluation of the minimum wage, most Peruvians are approving of the move though many note its negative impacts it will have on startups and other Small and Medium-sized Enterprises (SMEs are known as ‘PYMEs’ in Latin America).

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Most economists have criticized the suggestion of increasing the minimum wage to S/930, given the instability of the labor market. However, when the question was put to the population by the latest urban-rural El Comercio-Ipsos survey, the majority were in support of it. Though, some sections of the population realize the negative impact this could have on small businesses and in job creation.

According to the study, 72% of the population supports the increase. In fact, 30% of the respondents also believe that the increase in the minimum wage will influence them positively. Although this percentage of people are not directly impacted by the increase, people might believe that the minimum wage will aid in boosting their salaries as well.

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El Commercio reports that according to Juan Carlos Odar, executive director of Phase Consultores, people who agree with the increase in minimum wage work mainly in informal sections where compliance with regulations are less needed.

According to El Commercio, Hugo Ñopo, principal investigator of the Development Analysis Group (Grade) says that some of the survey responses have signs of misinformation. He cites, as an example, the 30% who believe that increased minimum wage will have a positive impact on the creation of employment despite the fact that the studies carried out in Peru and other countries find that it negatively effects the creation of employment.

Another result of the El Comercio-Ipsos survey is that 50% of the respondents say that the measure will have a negative impact on small businesses or ‘PYMEs’. El Commercio notes that among the 72% who approve of the measure, a significant proportion do so despite believing that it goes against SMEs, since people value their individual benefits more.

However, Ñopo told El Commercio that though many people believe that small businesses will be impacted negatively, it was not the case. He says that it’s the responsibility of the large companies to comply with regulations with respect to minimum salary. Small and medium companies have informal work set-ups and find ways to avoid paying the hikes.

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“60% of the workers who work in companies with 10 or fewer employees earn less than the minimum. Also, the percentage is 15% in companies that have more than 10 workers,” he says.

Peru’s minimum wage is the lowest amount a worker can be legally paid for his work. Most countries have a nationwide minimum wage that all workers must be paid. Currently, the minimum wage in Peru is about S/850, which amounts to around US $270 per month.

Taking a look at Latin America’s minimum wages per month, the following are the figures in descending order with their approximate value in USD:

Argentina –  10,000 Argentine pesos    – US $498

Uruguay   –  13,340 Uruguayan pesos   –  US $470

Chile          – 276,000 Chilean pesos       –  US $455.4

Ecuador    – 9854537.97 Sucre             –   US $391

Paraguay   2,069,392.04 Guarani          – US $371

Brazil         -1,132.93 Real                        –  US $325

Peru         –    850 Soles                            – US $270

Colombia   –  745,710.00 Pesos               – US $265

Venezuela   –  248,510 Bolivars         –   US $74

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