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Column 021808 Vallarta

Monday, February 18, 2008

Unemployment and Mexico’s Need to Create More Jobs

By Dr. José Enrique Vallarta Rodríguez

Unemployment in Mexico is one of the nation’s maladies.  In spite of splendid macroeconomic indicators that currently exist, continuing low levels of inflation, and stability in the peso’s exchange rate, the Mexican economy has not created a sufficient number of formal jobs in over ten years.  With the abundance of natural resources in our country, as well as its petroleum wealth, these benefits are not trickling-down to many of the people of Mexico who lack job opportunities and the means to raise their standards of living out of poverty and marginalization.

Furthermore, education has not been a solution in overcoming unemployment.  This insofar as compared to other countries there are few if any better paying jobs in Mexico for university and other well educated graduates.  In turn, this has caused standards of living among the urban middle class to deteriorate, and as a consequence brought on emigration from this sector to other countries, mainly the United States and Canada.

Current recessionary trends in the United States could have an even greater impact on unemployment in Mexico, in that such a great economic dependence on the United States exists.  As well, after crude oil export sales, remittances sent home by Mexicans working in the United States are Mexico’s second largest source of foreign exchange according to The World Bank.

So why does Mexico find itself in such an unjust situation, and why has it failed?

1.     The inequitable distribution of income.  According to The World Bank, Mexico’s inequitable distribution of wealth is second only to Brazil.  Eighty-five percent of the national wealth is concentrated in but a few families of entrepreneurs.  And in spite of efforts by government officials during the past three administrations, Mexico has been unable to create efficient public policies in order to compensate for the distortion of our market and the poor distribution of national income.

2.     An obsolete regulatory framework.  The absence of basic agreements among Mexico’s main political parties for more than ten years has caused a serious backwardness in needed legislation in a number of areas.  As a result of structural reform failures on labor, fiscal, energy and legal matters, Mexico has fallen behind comparable Latin American countries like Chile, Argentina, Brazil and Costa Rica by maybe 30 years, again according to The World Bank.

In order to improve present day employment opportunities in Mexico, we must exchange our laws and regulations for efficient instruments with greater legal certainty; encourage private investment; increase the collection of taxes; stimulate the productivity of businesses and the training of workers; and create more and better jobs.

3.     A lack of coordination in public agencies.  According to estimates, the population of Mexico has reached 105 million people, of which 57.5 million are of working age.  Of these, 15.6 million (27.2 percent of the economically active population) are covered by the Mexican Social Security Institute (IMSS).  The public agencies in charge of statistics and the promotion of employment in Mexico, which are the Secretariats of Labor and Social Security, Economy, and Social Development, as well as the National Institute of Statistics, Geography and Data (INEGI), and the IMSS, have no unity in the criteria and coordination of their work, there is duplicity in actions and activities without indicators and specific goals, and therefore they do not contribute solid nor efficient results in their daily work.

4.     An absence of competiveness principles.  The Mexican economy does not support unprivileged businesses, considering its current standards regarding monopolies, both in the public and private sectors.  By law there are public monopolies, government owned companies, controlling oil and gas, electricity, water, etc.  Private sectors monopolies are found in the media, television, telephones, cement, etc.  For this reason, clear principles of competiveness that offer incentives to private investment, both national and foreign, are needed in order for jobs to be created.

Taking everything into consideration, I feel certain that by making the suggested corrections and changes more and better jobs can be created in Mexico, and unemployment would thus be reduced.


José Enrique Vallarta Rodríguez, a MexiData.info guest columnist, received his doctorate in Mexican Electoral Law from the National Autonomous University of Mexico.  Mexico City-based, he has worked for the Federal Electoral Institute.


Translation MexiData.info