MEXICO CITY (AP) — Mexico announced Wednesday that it will increase its still strikingly low daily minimum wage by 12% next year.

But because the Mexican peso has dropped by 18% in value over the last year, the increase actually marks a slight drop in constant dollar terms.

The three-party minimum wage commission, made up of government, labor and business representatives, announced the increase Wednesday. It will take effect starting Jan. 1 2025.

The new daily minimum wage will be about 279 pesos, or about $13.75. The 2024 wage of 249 pesos per day was worth $14.25 when it was announced in December 2023, but in that time the peso has dropped in value against the U.S. dollar, from 17.20 then to around 20.30 now.

Domestic inflation in Mexico is currently running around 4.75%, so Wednesday's announcement could work out to a real-term increase of about 7%, unless inflation heats up.

That is still only about $1.71 per hour, compared to a U.S. federal minimum wage of $7.25 per hour. However, many U.S. states have minimum wage rates that range from $10 to $16 per hour.

Because living costs are higher along Mexico's northern border with the United States, the official minimum wage is higher there. For 2025, it will be set at around 420 pesos, or $20.70 per day.