José Manuel Suárez Mier*
My respected colleague and friend Macario Schettino published an article in which he maintains that the only way workers’ wages can be seriously raised is through increases in the labor force’s productivity that increase the competitiveness of the economy.
He cites as basic elements to achieve this: greater competition in the markets; more productive investment, which requires the existence of a solid rule of law and respect for contracts; and raise the quality of human capital by improving the educational system.
I would add two elements that seem essential to me: public and private investment in infrastructure that allows workers to produce more with the same effort; and avoid blunders such as setting salaries by decree or dictated from abroad.
Such infrastructure includes better public services in drinking water, electricity, transportation, personal and property security, and a long etcetera. The idea is that the environment that surrounds the worker improves enough so that their productivity rises with the same effort, as it happens when he emigrates to the United States.
The imposition of artificially high wages as demanded by US unions, embodied in the new North American trade agreement thanks to the terrible cession of Jesús Seade, cancels the comparative advantage of Mexico, which is the low wages resulting from the terrible environment that surrounds the worker.
Mexican officials who have touched on this issue, such as the fledgling Ambassador Esteban Moctezuma, threaten similar complaints about abuses by compatriots working in the United States. Apparently, they are unaware that the USMCA does not include reciprocity from the US, which Seade granted in this matter.
Citing an essay by Julio Leal from Banco de México, Schettino asserts that productivity in the automotive industry is 20% of that of the United States, so wages in Mexico should be around 10 times lower since the equivalent value of the dollar in Mexico (by purchasing power parity) is double.
The hope that the structural reforms approved five years ago would finally allow raising the labor force’s productivity in Mexico was shattered by the counter-reforms of the current government that go just in the opposite direction.
Its fatal result will be less competition in the markets, which fattens the monopolies and hurts the poor; lower investment due to growing uncertainty and mistrust; worse education, when the educational reform was reversed, and public education was handed over to the most retarded and dismal teachers union.
In the broad sense of the term, infrastructure is visibly getting worse: more frequent and widespread power outages; useless and poorly constructed public works; increasingly scarce and poorly managed water rationing; more paperwork in the face of an inept and fierce bureaucracy; growing polarization and social hatred.
The panorama darkens when adding the foreseeable ruin of the export sector due to the imposition of wages unrelated to worker productivity, designed by those who wish to extinguish sources of jobs in Mexico to take them to the United States, and a timid private sector that meekly accepts the policies that they will annihilate it.
*Consultant in economics and strategy in Washington DC and professor at universities in Mexico and the US. Email: aquelarre.economico@gmail.com
This column is also published in Spanish on June 24, 2021, in the Excélsior newspaper, based in México City.