Nicaragua’s minimum wage is the lowest in Central America

“It doesn’t stretch far enough,” is a lament heard up and down the impoverished Central American isthmus, voiced by the masses of workers who earn a basic wage that’s not enough to cover their needs. The situation pushes many into the informal market or impels them to emigrate. In Nicaragua, the minimum monthly wage – equivalent to US $213 dollars a month – is the lowest in Central America. The highest is in Costa Rica – equivalent to US $640 dollars monthly.

With nearly 50 million inhabitants in Central America, the precarious salaries, together with violence, are the main forces propelling the flight towards the United States. Family remittances sent back home by Central American emigrants have become the economic pillars of economies locked in a vicious circle of informal employment and working poverty.

The International Labor Organization (ILO) indicated in its latest report on the Latin American labor panorama that now, post-pandemic, the “most urgent” problem for the region in this area is the quality of employment and the insufficient incomes for workers, as well as the total incomes these workers and their families are able to generate.

Now, the global inflationary crisis has exacerbated the problem of low incomes, diminishing still further the workers’ buying power, that was already highly restricted in most of the Central American region.

Given all this, the ILO has issued an alert to Latin America and the Caribbean, warning of the “phenomenon of the working poor.” (…) “Those people who, even with a job in the formal market, find themselves in poverty.”

Minimum wages in Central America range from Nicaragua’s US $213 dollars – in a country with an annual per capita income of $2,102.80 according to 2021 data from the Central Bank – to Costa Rica’s US $640 dollars and annual per capita income of $12,333 in 2022.

In Guatemala, the per capita income is US $5,456 dollars and minimum monthly salaries vary by sector from US $381 – US $403.  The lowest minimum wage in Honduras is US $331 dollars, and the annual per capita income was US $3,010 in 2021. El Salvador’s minimum wage also varies by sector, with the lowest at US $243, and the highest set at US $365. The country’s per capita income is US $4,551

The annual per capita income of Panamanians in 2021 was US $14,617, according to data from the World Bank. The country has dozens of categories for minimum wages, depending on the activity and the region of the country, but the average is around US $380, economist Felipe Argote told EFE.

The other factor affecting the region is unemployment. Official statistics range from 2.6% in Nicaragua to 11.8% in Costa Rica, and include 8.7% in Honduras and 9.9% in Panama. However, around 50% of these jobs are in the informal market.

In Nicaragua according to independent economists such as Adolfo Acevedo, over 70% of jobs are in the informal sector, which offers neither minimum wages nor access to Social Security benefits.

My salary “doesn’t stretch far enough”

“Milagros” [assumed name] is a 69-year-old retired Panamanian woman who supplements her retirement pension by working for a cleaning service. She assured EFE that at the end of the month, she doesn’t have enough money to cover all the expenses of her household, which she shares with a daughter who’s currently unemployed.

“My pension is already mortgaged,” to pay off a loan, and the price of food and electricity are “ever more expensive,” this widow, mother, grandmother and former state employee explained. Between her retirement pension and her work cleaning offices, she brings in around US $700 a month.

However, this widow, a native of Panama’s interior Cocle Province, is earning just under double the minimum wage in Panama.

“The poorest paid jobs don’t further the economy,” economist Felipe Argote affirmed. He accuses the Panamanian government of implementing “a very antiquated concept,” that in order to preserve jobs, workers should accept “very small” salaries. This situation leads to more informal employment, “because it works out better to sell things in the street than to work at some of the formal jobs that pay less.”

In Guatemala, the minimum wage “is about 40% less than the cost of basic products,” economist Luis Linares, researcher with the Association for Investigation and Social Studies, explained to EFE.

“The low salaries, the difficulty finding a good job, and the lack of efficient public services end by increasing irregular migration towards the United States, because the salary levels can’t be compared,” Linares added.

The Nicaraguan salary doesn’t cover basic needs

In Nicaragua, the Ortega government decreed a 10% increase in the minimum wage last February. The exception to this increment were the workers in Nicaragua’s Free Trade Zones, whose salaries only increased by 8%. These increases weren’t enough to keep pace with inflation in the country, estimated at 11.6% in 2022.

None of the minimum wages established in Nicaragua – from the 5196.34 cordobas [US $142.50] of the agricultural workers, up to the 11,628.95 cordobas  [US $318.83] for construction – cover the cost of a month of basic products, estimated by the government’s National Institute of Development Information at 18,973.46 cordobas [US $520] in March.

The highest minimum wages, those of construction workers and the financial sector, only cover 86.2% of the cost basic foodstuffs for a month [estimated at just under US $370].

That’s a reality shared by El Salvador and in Honduras, where – according to Candido Ordoñez, director of the Honduran organization Labor Market Observatory – a family must earn at least three times the minimum salary to cover the cost of a month’s basic food products, plus rent and utilities.

In Costa Rica, the most recent report of the National Institute for Statistics and Census information (INEC) notes that in 2022 the average annual household income was around US $1,878 dollars, 3.2% more than in 2021, but not enough of an increase to compensate for the 10.06% rise in prices year-over-year. (to July 2022).

This article was originally published in Spanish in Confidencial and translated by Havana Times