The double talk: more formal workers, but cheaper ones

El Universal 05/08/17
Samuel García

Salaries in the Mexican manufacturing industry were 2 dollars per hour last February, vs. 4.7 dollars in Chile and 20.7 dollars in the US.

Twenty million workers affiliated to the Social Security institute (IMSS). That is the goal that President Enrique Peña Nieto announced on May 1st by the end of his term, in an event surrounded by union leaders, employer leaders, and the officials of his government.

The goal seems achievable in the over 19 months remaining to his administration. At the end of last March, the number of workers registered before the IMSS were but a hairsbreadth away from the 19 million, so the presidential bet is that they will add, at least, a million more. In 2016, the number of workers affiliated to the IMSS grew by 732 thousand 591, and in 2015, this growth was of 644 thousand 446. So, if the pace of affiliations from the last two years continues, Peña Nieto will have achieved the goal he announced at the last celebration of the International Labor Day, even though a large measure of these formal employment creation figures are due to a more efficient recording by the IMSS itself and the fiscal authority (SAT).

While labor formalization is one of the main challenges of the Mexican economy nowadays, given its implications on workers’ wellbeing, there are others that must be solved.

Perhaps the most relevant given its backwardness is workers’ income. Inflation, measured by the National Consumer Price Index, increased 5.35% between March 2016 and March 2017, while the salary of workers affiliated to the IMSS rose only 4.49% in the period. That is, workers’ daily salaries reported to the IMSS suffered a decrease in real terms in the last 12 months.

According to the statistics institute (INEGI), workers’ real average remunerations (salaries or wages and benefits) in the manufacturing sector only grew 0.2% annually in February; however, 16 to 20 manufacturing subsectors experienced negative growth rates in the second month of the year.

In an international comparison, salaries in the Mexican manufacturing industry were 2 dollars per hour last February, vs. 4.7 dollars in Chile and 20.7 dollars in the US.

We have a serious problem in the country with workers’ income. Not only because of the huge gap—the highest among OECD countries—between the few with high incomes and the many with low ones, as the OECD stated in its latest economic report on Mexico (http://www.oecd.org/eco/surveys/mexico-2017-OECD-Estudios-economicos-de-la-ocde-vision-general.pdf), but also because the public policy that the Mexican government is fostering regarding the competitiveness of the Mexican economy remains based in the low real incomes of Mexican workers. That is how ProMexico—the federal government’s agency for trade and attracting investments from the world—promotes it.

Last May 5, reporters David Welch and Nacha Cattan, from Bloomberg, published a note illustrating this policy that Peña Nieto’s government has followed with the investments of the large automakers. The case that Bloomberg wrote about was the investment by German luxury automaker BMV in San Luis Potosi, totaling a billion dollars and generating 1,500 jobs to produce the firm’s series 3 sedans.

The German company, in agreement with the Mexican Confederation of Workers (CTM) and with support from the government through the Ministry of Labor, headed by Alfonso Navarrete Prida, set a starting salary of 1.10 dollars per hour and a maximum of 2.53 per hour for assembly line workers, according to Bloomberg. A starting salary that is nearly half of what is paid, on average, in the automotive industry in Mexico. And all—union, protection contracts, and salaries—behind the backs of the workers who will be employed there.

It is the government itself that continues to offer not only cheap labor to foreign investments, but also to foster practices that are contrary to workers’ labor rights. And that is what they call competitiveness!

Thus, the 20 million workers registered with the IMSS that President Peña Nieto has promised by the end of his term appears like a good purpose to gain ground from the informality that so damages the formal economy.

But the President is giving a double talk that ruins the credibility of his labor and investment policy:  when his own government fosters the instability of those formal jobs and encourages old and toxic union practices against workers themselves.

 

Text translated by the Instituto VIF from the original published by El Universal.
Link: http://www.eluniversal.com.mx/entrada-de-opinion/columna/samuel-garcia/cartera/2017/05/8/el-doble-discurso-mas-trabajadores