The economic literature on competitive labor markets suggests that rises in real minimum wages can hurt employment and training, especially of young and unskilled laborers, and promote informality. Also, there may be some pass-through from these increases to prices of final goods and services.
The degree of these and other impacts remains an empirical issue.3 In the case of Mexico, these effects could be material, for at least two reasons. First, negotiations of private-sector contractual salaries have tended to take into account minimumwage revisions as a floor reference, although the two are not automatically tied.