Mexican Economic Growth Doesn’t Help Workers
Rodolfo Cruz-Piñeiro, a professor and researcher in population studies at El Colegio de la Frontera Norte in Tijuana, says that while new manufacturing plants are sprouting up frequently in the northern border region, that trend hasn’t translated to higher wages.
“The quality of life in general is not so good,” Cruz-Piñeiro said. “The improvement for the workers is very marginal when compared to the macro-economic indicators. In terms of wages per hour … it hasn’t improved.”
That wage stagnation has helped the country attract business away from China. Between 2009 and 2011, Chinese labor costs rose by about 30 percent, while in Mexico the hourly wage dropped by a small margin over the past year. Since 2005, wages have only risen by a yearly average of 0.4 percent when adjusted for inflation.
While the current rate of around $2.50 per hour is roughly 25 cents more per hour than in China, it likely won’t stay that way for long.
Erik Lee, the associate director of the North American Center for Transborder Studies at Arizona State University, says Chinese wage inflation, combined with rising oil and shipping costs, has prompted many multinational corporations to choose Mexico.
“Geography is … destiny,” Lee said. “Being right next door to the world’s largest economy is a tremendous advantage. Companies doing business in Mexico will put their products on a truck and they can be pretty much anywhere in the United States in a day or two.”
Case in point: the auto industry, which continues to expand production in Mexico. In March, automobile giant Honda opened a new plant in Celaya, while Audi announced in September that it would build its new North American plant in San José Chiapa – the third facility in the country for its parent company, Volkswagen.
Wage hikes in China have caused some manufacturers to return to the U.S., but in Southern California that sector is still caught in the downward spiral it’s faced throughout the recession.
Unskilled laborers looking for work in L.A. County were dealt more bad news this month with the Department of Labor’s announcement that 5,100 manufacturing were jobs last year– the only industry to post an overall decrease in jobs. That’s despite an overall addition of 74,000 jobs in the region during that time. Nationally, unemployment fell from 8 to 7.8 percent in August.
Meanwhile, unemployment in Mexico currently sits at 5.4 percent. But both Cruz-Piñeiro and Lee say that number should be taken with a grain of salt, due to the large informal market of unregulated labor in the country.
Cruz-Piñeiro said that half the country’s adults make at least some portion of their income from cash-in-hand jobs like street vending, farm work and maid services. The Wall Street Journal puts that number at a third of the population. Either way, that reality makes it tough to view the unemployment rates of the U.S. and Mexico side by side.
“This is a big problem because many of these people [in Mexico] are working in that condition,” he said. “It’s difficult to compare the labor force of Mexico to the United States, because 98 to 99 percent of the workers in the U.S. are regulated and taxed.”
Cruz-Piñeiro added that he thinks there’s a flaw in the way the country tallies its workers through the national employment survey.
“They [poll workers] go to households and ask people if in the last week they worked for at least one hour.” He says that leads to skewed results because “many people worked at least three or four hours a week, but actually they were working in the informal market.”
Lee said life in Mexico is still hard on lower-income earners despite the country’s 4.1 percent GDP growth in the second quarter of 2012, which was actually below some analyst projections. He added that the halt in migration north of the border from Mexico couldn’t be explained by the economy alone.
“Mexican migration to the US has been down for several reasons. One, you have stepped-up enforcement both along the border and in the interior of the United States.” Lee said a second factor is that “migrant corridors … have become tremendously violent, like the eastern corridor in Mexico that goes through places like Tamaulipas.”
Despite the gap in unemployment rates between the two countries, Lee said neither country was an enticing destination for migrant job seekers.
“I don’t know that the prospects are that much better in Mexico,” Lee said. Traditional migrant-heavy industries such as hospitality and construction have been hit so incredibly hard in the United States. Folks are just kind of stunned at having their livelihoods go away … Mexico looks that much a better bet.”
With new business-friendly labor laws making it easier for Mexican companies to hire and fire workers, and also to institute temporary employment contracts, it seems President Enrique Peña Nieto’s incoming PRI party is not about to make things any easier for the nation’s poor.