Increase in the minimum wage in Peru: a dilemma for microenterprises and their employees

The debate over increasing the minimum wage in Peru has generated considerable polarization among different economic actors. In most cases, the narrative has focused on large corporations that, according to some, seek to maximize their profits at the expense of workers. However, the reality is much more complex, especially considering that microenterprises, which employ between one and ten workers, make up 99.5% of the business fabric in the country. With such figures, it is evident that micro and small enterprises (mypes) are the backbone of the Peruvian economy. According to a recent report by ComexPerú, these mypes represent 48.3% of the Economically Active Population (PEA). Despite their relevance, the current context is uncertain and challenging. In 2023, nearly 80,000 mypes ceased operations, while those that managed to survive faced a 1.5% decline in sales compared to 2022. This situation becomes even more concerning when comparing these figures to 2019, where the decline in growth was 5%. In this environment, an increase in the minimum wage could exacerbate the difficulties these businesses already face. The increase in the minimum wage, although motivated by the desire to improve working conditions, could have unintended consequences. Raising labor costs may push many microenterprises to reduce their workforce or, in the worst-case scenario, to close their doors permanently. This outcome would not only affect the workers but also the families that depend on these businesses for their daily livelihood. The risk of job loss becomes a key concern at a time when the economy is still seeking to recover from the aftermath of the pandemic and other crises. Informality is another critical aspect to consider. Currently, 86.3% of mypes operate informally, which further complicates the situation. In a scenario where productivity is low, an increase in operating costs could discourage the formalization of these businesses. This would not only perpetuate the cycle of informality but also limit opportunities for workers to access quality jobs and social protection. The pursuit of a better quality of life is threatened when the measures adopted can transform protected workers into unprotected employees. The profile of micro and small entrepreneurs in Peru is also revealing. 53.4% of these entrepreneurs started their businesses out of economic necessity, indicating that many lack the financial capacity to absorb any increase in operating costs. The current context highlights the vulnerability of these entrepreneurs and the precariousness of their situation. An increase in the minimum wage could force many mypes to operate informally, which in turn would generate a series of negative consequences that would further complicate the search for effective solutions. In light of this scenario, it is essential to consider alternatives to increasing the minimum wage. Measures are needed that incentivize formalization and improve the productivity of mypes. This could be achieved through the simplification of administrative procedures, access to adequate financing, and the offering of business training programs. By empowering these businesses, their growth could be facilitated, thereby offering better working conditions without compromising their economic viability. The issue of raising the minimum wage should not be viewed in isolation; it should be framed within a comprehensive approach that takes into account the realities of all sectors of the Peruvian economy. Increasing the minimum wage in this context may not be the solution sought, but rather a trap that jeopardizes the stability of mypes and, consequently, that of millions of families. It is urgent for authorities and policymakers to understand that the true path to improving working conditions in Peru does not lie in solutions that could be detrimental, but in creating an environment conducive to the prosperity of micro and small enterprises. These businesses are the true engine of the national economy and, ultimately, the livelihood of a significant portion of the Peruvian population. Therefore, the challenge is clear: to develop policies that strengthen mypes while simultaneously seeking to improve labor conditions through productivity, rather than increasing the minimum wage without considering its potential repercussions. In a country where informal economy and labor precariousness are tangible realities, it is vital to find a path that prioritizes the growth and sustainability of businesses, for the benefit of all.