Once again, President Arévalo does not cease to surprise us. This time he does so with a decree that reinforces an uncomfortable but necessary assertion: the minimum wage is an economic mistake and a moral destroyer of society. Why? Because it does not protect the most vulnerable; it destroys the hopes of the poorest and of those who most need an opportunity to begin.
Wages are not decreed: they are sustained by productivity, investment, and growth. When a minimum wage is imposed above the productivity of broad sectors, work is not dignified; it is condemned to informality or to the silent disappearance of employment.
Guatemala is today a country where seven out of ten workers are informal.1 In recent years progress had been made, approaching two out of three, but that improvement did not hold. Not because Guatemalans are lazy, nor because they refuse to integrate into the country. Guatemalans are informal because the State does not offer real conditions for formality to be possible, sustainable, and attractive. In a society that aspires to national unity, formality should be the principal indicator of commitment to the country, and its enabler should be the government itself.
The first place where this mistake exacts its toll is manufacturing. The sector still showed resilience and was growing compared to 2023, but the breaking point appeared after the 2025 wage increase. In February, the industry employed 239 thousand formal workers. By October 2025, the figure had fallen to 225 thousand. In just eight months, 14 thousand formal jobs were lost. The detail matters: while the number of workers fell, the average wage rose from Q5,680 to Q5,965.2,3 Companies did not stop paying; they stopped hiring. They kept the most qualified personnel and dispensed with positions close to the minimum wage. That pattern coincides with the evidence: when labor costs exceed productivity, the adjustment falls on hiring and on the most vulnerable workers.
In agriculture, the damage is even harsher. In February 2025, agriculture reached its peak with 114 thousand formal workers. By October 2025, it had fallen to 103 thousand. These are 10 thousand jobs that disappeared or migrated to informality in eight months. The cause is obvious: the average agricultural wage (Q3,787) already falls below the total legal cost of a worker in the central region (Q3,843).2,3 When the law forces payment beyond what the sector can sustain, dignity is not produced; exclusion is.
The paradox becomes crueler when observing what happened with mining. For years, it was the best-paying sector in Guatemala. In 2023, its average wages were among the highest in the country.2,3 In addition, it offered well-paid formal employment and opportunities in rural territories with few alternatives. However, instead of strengthening that engine of productive employment, it was turned into an ideological enemy. Confrontation and the paralysis of projects struck precisely the segment that demonstrated that better wages are indeed possible in sectors with greater added value. At the same time, the employment structure tilts toward a troubling fact: the public sector positions itself as the largest employer and the second with the highest average wages. While opportunities in agriculture, manufacturing, and mining contract, the State grows and pays itself better.2,3
Now then: the discussion cannot become a caricature of “bad businessmen” against “good State.” The data dismantle that narrative. When a sector needs talent and produces value, it pays better without anyone forcing it to do so. The resilience of high value-added services demonstrates this clearly. Financial intermediation has not stopped growing: from 76 thousand workers in 2023 to 87 thousand by October 2025, an increase close to 14%. In the same period, the average wage rose by more than 11%, reaching around Q6,875. That wage is nearly 85% above the minimum, meaning legal increases do not alter its hiring structure. Something similar occurs in electricity: without a “wage decree,” employment rose from just over 11 thousand to more than 14 thousand workers.2,3 Where there is productivity, investment, and competition for talent, wages rise out of business necessity, not government imposition.
The scientific literature supports this diagnosis. Meer and West show that minimum wage increases reduce employment growth over time;4 Neumark confirms that the negative effects are concentrated among young and low-skilled workers;5 and Clemens and Wither document losses in employment and income precisely among the least qualified.6 According to Bossavie, Erdogan, and Makovec, in economies with high informality, employment does not disappear: it moves outside the law.7
Europe also offers an uncomfortable lesson. Several of the countries with the highest welfare and strongest social cohesion—Austria, Finland, Iceland, Norway, Denmark, Italy, and Sweden—do not have a mandatory minimum wage. They prefer sectoral collective bargaining anchored to productivity and the reality of each activity. Germany, with all its industrial power, introduced a national minimum wage only in 2015. To facilitate entry into the labor market, reduced rates for young people (between 16 and 25 years old) exist in the United Kingdom, Spain, Portugal, the Netherlands, Luxembourg, Ireland, France, and Belgium.8
The numerical contrast is striking. France—the highest European case—places its minimum wage at around 60% of the median wage. Other countries operate with much lower ratios: 35% in the Czech Republic, 41% in Estonia, and 44% in Spain. Guatemala, with the new adjustment, stands close to 67% of its median wage. In other words: Guatemala exceeds the European maximum in relative minimum wage, despite having far lower productivity and much higher informality.8
In Latin America, the problem worsens when comparing the minimum wage to GDP per capita. Countries such as Chile and Uruguay sustain annual minimum wages equivalent to between 30% and 40% of GDP per capita; Costa Rica stands around 55%–60%. Guatemala, by contrast, dangerously approaches 80%–100% of GDP per capita when considering additional legal payments. In relative terms, Guatemala ranks fourth in the region, surpassed only by economies with ideologized wages such as Honduras, Nicaragua, and Bolivia.9 Put bluntly: Guatemala is trying to pay “top-level” wages with a “bottom-level” productive base. That is not social justice; it is a recipe for expanding informality and closing the door to formal employment for those who most need to enter it.
When the first rung of the labor market is artificially made more expensive, young people do not gain access to better wages; they lose the opportunity to enter. The acquisition of skills is postponed, career trajectories are weakened, and inequality of origin deepens. That is why Guatemala needs a technical, transparent, and verifiable formula that relates the minimum wage to sectoral productivity, company size, and real absorption capacity—not an annual political whim or presidential prerogative. Every percentage point of increase unsupported by productivity is paid for with less formal employment, fewer first opportunities, and greater informality. A country with a still-active demographic bonus cannot afford to close the entry door to the labor market for its youth.
But the wage discussion is only one part of the problem. The real challenge is raising the country’s productivity. And that requires more difficult decisions: attracting investment, reducing barriers to formality, facilitating business creation, and seriously committing to human capital. No decree substitutes for that work. No legal increase corrects an economy that produces little value.
True social justice is not decreed. It is built by creating real opportunities. A country that aspires to national unity cannot measure its commitment through speeches, but through results. And the clearest indicator of that commitment is formality. When formality grows, there is integration, future, and hope. When it is punished, what remains is not dignity, but exclusion. That is the moral cost of a poorly designed minimum wage. And that is the debate Guatemala can no longer continue postponing.
References
- INE (ENEI) for informality (phrasing “seven out of ten / two out of three”).
- Ministry of Economy (MINECO), Policy and Economic Analysis Directorates: Weekly Economic Reports (weekly editions from December 2023 through December 2025).
- Guatemalan Social Security Institute (IGSS): Statistics of Employers and Affiliated Workers by Economic Activity.
- Jonathan Meer & Jeremy West, “Effects of the Minimum Wage on Employment Dynamics” in NBER Working Paper Series. National Bureau of Economic Research. (2013)
- David Neumark, “Employment Effects of Minimum Wages” in IZA – World of Labor. Evidence-based policy making. (2018)
- Jeffrey Clemens & Michael Wither, “The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers” at the University of California at San Diego. (2018)
- Laurent Bossavie, Aysenur Acar Erdogan & Mattia Makovec, “The Impact of the Minimum Wage on Firm Destruction, Employment and Informality” in World Bank Group, Policy Research Working Paper 8749. (2022)
- Line Eldring & Kristin Alsos, “European Minimum Wage: A Nordic Outlook” in FAFO report. (2012)
- World Bank / ECLAC for GDP per capita and regional comparisons.
