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 Business News | January 2007 
Mexico, Calderón and a 3.9 Percent Wage Factor
 Kenneth Emmond - MexiData.info
It’s starting to look like the leftists’ fears of Mexican President Felipe Calderón are becoming a reality.
The position of the left, after filtering out the issue of the legitimacy of last July’s election, was that Calderón was the candidate of the party that represents business interests (the National Action Party, or PAN), and little would change for poor Mexicans if he were elected.
After the election, a victorious Calderón vowed to work for all Mexicans whether or not they voted for him. That’s not what we’ve seen so far.
First we had the budget, where a proposed reduction of 25 billion pesos, about US$2.3 billion, in education spending was reversed only by the wisdom of Congress.
The logic of cutting funding for one of the most important government departments is elusive.
Even if he wants to do an end run on the powerful teachers’ union by promoting private schools over public ones, Calderón must spend a bundle recruiting and training corruption-proof inspectors to ensure that schools don’t degenerate into Dickensian horror shows.
Many existing private schools could do with enhanced inspections. To be sure, there are many excellent ones. In others, however, short-changing teachers on their salaries, illegally withholding exam results pending dues payments, and parental bribes to enhance student evaluations are, shall we say, not unknown.
Then, on Dec. 29, the National Minimum Wage Commission published the minimum wage increases for 2007 — a paltry 3.9 percent.
That’s barely enough to cover cost of living increases. In two of the three regions into which the country is divided for the purpose of determining minimum wage it’s still below 50 pesos per day — well below US$5.00.
It’s not hard to divine who has the president’s ear.
A month before the minimum wage decision was announced, Tomás Natividad, president of the Labor Commission of the Confederation of Business Owners of the Republic (Coparmex), said the minimum wage rise should be below four percent.
If it was above five percent, he said, many businesses would have to close.
Apart from the well-known fact that businessmen worldwide are notorious for poormouthing when faced with cost increases, this raises the question of whether a business deserves to survive if it can’t pay its workers a living wage.
One of Natividad’s arguments was that the minimum wage is only a yardstick in most cases — that is, a worker might be contracted to earn three or five times the minimum wage, and a hefty rise would be disproportionately onerous.
Another canard is that unions often negotiate increases beyond the minimum wage — a position that conveniently overlooks the majority of workers without union protection.
Those lines of thinking come straight from the Land of Spurious Reasoning.
Coparmex president Ricardo González is more direct: he says that a rise in minimum wage shouldn’t exceed inflation. One supposes that if inflation increases during the year workers will just have to grin and bear it. In effect, a business risk is adroitly shifted from business onto employees.
González is really saying that the only goal should be to keep business costs down, even though it effectively prevents the vast majority of Mexicans from spending more — and stimulating economic growth.
This argument is not new. It has held down wages ever since the 1994-95 peso crisis, when most businesses truly were struggling to stay afloat.
That many were able to do so was largely because labor costs remained disproportionately low. Meanwhile, the purchasing power of the minimum wage eroded to the point where it’s well below the level needed to buy the goods necessary for survival.
In other words, Mexico’s recovery was in large part achieved on the backs of those least able to negotiate their share of benefits from their work.
In recent years, profits have returned to most businesses and the economy is growing at a healthy if unspectacular rate of about four percent. Yet the business community continues to call for labor to support its growing prosperity.
In his New Year’s message, Calderón urged Mexicans to work passionately for Mexico’s future “so that, together, we can build a better Mexico.”
Astute politician that he is, Calderón surely must realize that Mexicans who can see from the size of their pay packets that there won’t be a better Mexico for them, at least for another year, have little incentive to put much passion into their efforts.
Unless, as leftists maintain, he’s only talking to some Mexicans.
Kenneth Emmond, an economist, market consultant and journalist who has lived in Mexico since 1995, is also a columnist with MexiData.info. He can be reached via email at Kemmond00@yahoo.com. |
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