The debate on the minimum wage in Guatemala isn’t new. The labor force is growing rapidly in Guatemala, and it’s becoming better educated. But average earnings are declining as well, creating a downward spiral for the labor market. Before the COVID-19 crisis, the labor market in Guatemala was already under intense pressure. But what’s the minimum wage in Guatemala doing to the economy? And what will the impact of a minimum wage in Guatemala mean for COVID-19?
The average salary in Guatemala
If you are interested in studying in Guatemala, you should know that the average wage in the country is very low compared to the average salary in the United States. The average work day in Guatemala is eight hours long and can be up to 48 hours long in some cases. The number of daytime hours that people can work is also low compared to the average work day, making the work day only forty-five hours long for salary purposes. As a result, Guatemalans are usually very poor, with persistently high rates of inequality and poverty.
The average salary for teachers in Guatemala is $450. However, salaries for headmasters and other officials of the security ministry are higher. A headmaster or professor in a university is paid $780, while a college or technical school teacher earns $620. A director at a technical school earns $1460. In the medical field, the average salary for a general practitioner is $700, while a surgeon’s salary is $1010. A nurse will earn $530 and a chief doctor at a hospital can make $5600.
According to the National Institute for Employment and Training (NIE), the average salary in Guatemala is Q183,789 GTQ per year. In the same way, the maximum salary for a single position is Q46,800 GTQ, while the lowest one is Q88. The salaries of different occupations vary significantly, so it is important to know the average salary in Guatemala for the job you’re considering. The table below details the salary of various positions in Guatemala.
Compared to other countries in Central America, Guatemala’s labor code is similar. The Labor Code is similar, allowing employees to work for 45 hours a week and then earn 1.5 times as much during overtime hours. A World Bank study says that low taxes and poor spending are two main reasons for Guatemala’s poor economy. Consequently, the country’s infrastructure is poor and growth is slow. A recent World Bank study has identified low taxes as a primary cause for Guatemala’s slow economic growth.
The Committee on Economic, Social, and Cultural Rights has just concluded its examination of Guatemala’s third periodic report on the issue of minimum wage. However, the country has yet to ratify the Optional Protocol to the Covenant. It is possible that this may be because of significant social resistance to the introduction of a minimum wage. In addition, the country is still developing its methodology for estimating tax revenues. These issues must be resolved before the implementation of the Covenant can be considered successful.
In this report, we examined the country’s policy framework on the issue of social spending and fiscal policies. We asked how to address issues such as high levels of unemployment, inadequate minimum wages for the informal sector, and insufficient strengthening of the Labour Inspectorate. We also asked about the state of poverty and social protection, as well as the level of unemployment and malnutrition among the indigenous population. We are hopeful that our recommendations will provide Guatemalan policymakers with some insight into the challenges and opportunities they face in this regard.
In contrast, there are many ways in which a minimum wage can increase productivity and promote inclusive social development in Guatemala. For instance, in the United States, the minimum wage has increased employment among low-skilled workers by as much as seven percentage points, which is twice the rate in Guatemala. This is the only Latin American country where the rate of exclusion is higher than that of the United States, with an average of 10.5 percent.
In the case of Guatemala, the minimum wage increases wages in the informal sector, which will benefit both low-income and high-wage workers. The increase in compensation may slow the growth of formal employment. This can, however, help the informal sector increase its overall output. The overall employment level of the country may decrease or stay the same, with formal sector employment increasing. The effect on employment rates is thus a mixed bag.
While the Commission notes that Guatemala’s lack of compliance with international labor standards raises the risk of a rise in child labor, a major reason for school dropout. Children aged between 10 and 14 complete an average of just 1.78 years of school, compared to 2.05 years for non-working children. In order to achieve social peace and develop democracy, Guatemala should put education at the center of its efforts.
Moreover, Guatemala has a poor justice system. Its legal system is weak, which allows for the proliferation of illegal and unethical networks. This is detrimental to children’s rights and must be regulated and protected as much as possible. The Commission reminds the state that children and adolescents must be provided with the basic necessities of life. This is especially important since children will be the future leaders of democracy and the rule of law.
Impact of minimum wage on COVID-19
Wage setting and the minimum wage have a key role to play in addressing the COVID-19 crisis, a social distancing phenomenon that has already hit some countries. However, the COVID-19 crisis poses a major challenge to wage-setting mechanisms. It is imperative that wage-setting mechanisms be flexible enough to react to new conditions, while also maintaining demand and incomes. Balancing these two imperatives is not an easy task, especially given the complexities of government and social partners.
The new schemes are intended to support workers in difficult circumstances. They are generally designed for non-standard workers, with varying levels of support. In Denmark, firms can apply online and in the United Kingdom, retroactive support is possible. Support levels differ from country to country, ranging from 100% in Denmark to 75% in Latvia. In Greece, support is flat-rated at 800 Euros, while in Iceland, it is equivalent to the regular unemployment benefit rate.
While government wage support schemes are aimed at retaining workers, some governments do not have widespread job retention policies. In Norway, the government wage support scheme was negotiated by social partners and helped re-employ laid-off workers. Although Hungary does not have widespread job retention measures, it has been able to support job creation. Nonetheless, wage support mechanisms are complex and require time and effort to implement. Moreover, there have been reports of significant administrative problems and payment delays in Romania and Bulgaria.
While the goal of these wage subsidy schemes is to lower costs for firms, some of these policies have led to abuse. Some firms may overreport sales figures, which is used as a criterion for eligibility. Others will underpay employees simply to make ends meet. This is a big issue to be addressed in COVID-19, and it is critical to find the right balance between costs and benefits.
However, the effect of wage increases on employment has a significant asymmetrical nature. This asymmetrical impact on wages has resulted in lower real wage increases for certain groups of the population. These groups include women, young people, and immigrants. In addition, low-paid workers are more likely to receive unemployment benefits. These factors may explain the asymmetric impact on wages. In the meantime, the minimum wage increases have caused an overall decrease in employment in the low-wage sectors, with fewer benefits for workers who are in the lowest-paying sector.
While the STW schemes are not based on hourly pay, they are akin to a minimum wage increase. These schemes require employers to subsidize workers with a percentage of their normal wage for hours they don’t work. As a result, employers will be forced to pay their workers at least 70% of their usual wage. However, it is important to remember that this subsidy is proportional to the reduction in sales and working hours.