From 48 to 40 Work Hours in Mexico. The Potential Impacts of a Constitutional Amendment on the Real Estate Market

The working hours reduction in Mexico aims to improve workers' quality of life and promote a better balance between work and personal life. At the same time, it poses significant challenges for the private sector, including productive sectors like construction, which could have repercussions in the commercial real estate market, where increases in operating costs and a gradual inflationary process could impact property prices and business competitiveness. Therefore, this change will require a strategic and careful adaptation process by all stakeholders.

For the past few months, lawmakers in the Mexican Chamber of Representatives have been discussing an amendment to section IV of Article 123(A) of the Mexican Constitution, aiming to reduce the weekly work hours from 48 to 40. This proposed amendment, which has yet to be voted on in the plenary, not only seeks to shorten the workweek but also to increase mandatory rest days from one to two per week. Nevertheless, it is necessary to ask about the implications of this amendment for the construction and commercial real estate sectors in Mexico.

Data points are revealing. According to the National Institute of Statistics, Geography, and Informatics (Inegi), in Q1 2023, construction sector workers averaged 51 weekly hours. The proposed reduction to 40 hours would not result in lower wages, as it suggests working fewer hours for the same salary. Consequently, overtime pay would kick in from the 40th hour instead of the current 48th. Thus, this is where the private sector's initial concerns emerge.

According to El Economista, an analysis conducted by AON indicates that companies may need to increase their workforce by 13% to 15% to maintain production levels within the new legal limit of weekly hours per worker. This could lead to a higher demand for personnel and, consequently, increased operating costs.

Likewise, during the Open Parliament forums on the Article 123 Constitutional reform, some representatives from the business sector pointed out that this reform could affect the competitiveness of micro, small, and medium-sized enterprises (MSMEs) in Mexico, jeopardizing their viability. They also noted that if the reform is approved, the need to open new shifts and hire additional staff to cover extra hours and mandatory rest days could lead to an inflationary effect ranging from 15% to 40%. This would impact industries like construction and, consequently, property prices.

But what about the commercial real estate market? In a context where, according to data from Inegi's National Producer Price Index (PPI), construction material prices had already increased by nearly 35% between August 2020 and 2023 in Mexico, any additional cost hikes could significantly affect investors and entrepreneurs in the commercial real estate sector. This could result in increased pressure on prices and profitability in the market, potentially hindering investment and growth in this sector.

Reducing the workweek in Mexico presents significant labor benefits and challenges for both the construction and commercial real estate markets. It will require careful planning and adaptation by authorities and businesses to maintain competitiveness and viability in a changing environment.

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