Aiming to keep poor Mexican families at the breadline (but no higher): The effects of minimum wage, tax, and social policy changes between 1994 and 2012

Welfare policy in Mexico has been transformed in recent decades. During the years of the import-substitution industrialization economic strategy and the hegemonic party political regime, social policy was based on social insurance programs of limited coverage to urban formal sector workers and their families. In the mid-1990s, an unprecedented expansion of social protection through social assistance programs was triggered, along with social insurance reform. This article assesses the effects at the household level of social policy changes, in combination with changes in taxes and the minimum wage, which also impact the welfare of the population. The research applies "model families" to establish effects of social, tax, and minimum wage policy changes across population groups, and their combined potential to combat poverty. Findings show that although taxation and social policy changes increased redistribution towards poor families, their capacity to lift and keep them above poverty thresholds was limited by the drop in the real value of the minimum wage and by strict targeting mechanisms, which exclude families that do not meet eligibility criteria but still fall below poverty lines. Social policy expansion merely subsidized the drop in real minimum wage, and poor families at best remained at similar income levels. Hence, the logic of the design of welfare policy changes can be characterized as aiming to keep poor families on the breadline, but no higher.