In Mexico, a booming auto industry but stalled living standards for workers
MEXICO CITY -- Mexico”s booming automobile industry is generating more export dollars than oil, building more cars than Brazil and giving a job to Esmeralda Velazquez. What it isn”t doing is raising her living standards.
The 37-year-old machine operator at an auto suspension plant earns $295 per month -- not enough to afford a telephone service or separate beds for her two daughters, let alone a computer or car. Pay raises have barely kept pace with inflation since she began working in the industry 15 years ago, she said.
â€œWhen I see a nice car pass by I think, ”I made that suspension but I”ll never be able to own one,”“ Velazquez said from her rented cinder block home in the city of Queretaro, about 130 miles northwest of Mexico City.
Productivity has risen twice as fast as wages since 2005 in Mexico, Bank of America Corp. calculates, helping the country attract investment and become the second-largest auto supplier to the U.S. and the world”s biggest flat-screen TV exporter.
The flip side is there”s not much left over for workers, capping retail sales and keeping economic growth in the past 10 years at less than half the pace of regional peers such as Chile, Peru and Argentina.
While Mexican exports have risen an average 7.1 percent a year since 2001 on the competitiveness of local industry, domestic retail sales gained 2 percent through the end of last year. That compares with 5 percent in Chile, 5.1 percent in Brazil and 5.6 percent in Colombia.
â€œPurchasing power has deteriorated,“ said Rafael Camarena, an analyst at Grupo Financiero Santander Mexico SAB. â€œLow salaries, the result of slow growth, are becoming a limiting factor for the development of the domestic market and therefore for the economy.“
Since 2003, Mexican workers” earnings in the auto industry have risen an average of 0.3 percent per year more than the inflation rate, according to data compiled by the Labor Ministry. It”s a pattern repeated across the economy.
Andres Escamilla, a janitor at a Mexico City office building, said the 3 percent pay raise he received this year pushed his wage to about $8 a day. Consumer prices are expected to rise 4 percent this year, according to analyst estimates compiled by Bloomberg.
â€œThe last time I can remember going shopping for something other than food or school supplies was four or five years ago when I bought bunk beds,“ Escamilla, 52, said as he emptied a sidewalk trash can. â€œElectronics, computers -- no way.“
The U.S., Mexico”s biggest trading partner, is facing similar challenges, even though its average per capita income is more than three times larger than Mexico”s. Inflation-adjusted compensation per hour rose 0.7 percent over the past five years, the weakest growth for any expansion of comparable length since World War II, according to Bureau of Labor Statistics data compiled by Bloomberg.
In Mexico, average salaries rose 0.6 percent a year after inflation in the decade through 2012, International Labor Organization data show. Wages climbed about twice as fast in Brazil and Colombia, three times faster in Chile and five times more rapidly in Peru.
Labor unions, which are organized at each automaker rather than providing representation across the industry, have failed to boost wages significantly, according to Armando Soto, president of Kaso & Asociados, a Mexico City-based auto industry consulting company.
Mexico's booming auto industry is generating more export dollars than oil and cranking out more light vehicles than Brazil, but it's not raising the standard of living for workers like Esmeralda Velazquez, at home.Photo credit: BLOOMBERG
Due in part to weak domestic demand, according to Citigroup Inc. analyst Sergio Luna, Mexico”s economy grew 2.6 percent per year over the past decade compared with Brazil”s 3.8 percent, Chile”s 4.7 percent and Peru”s 6.4 percent.
Mexico, which has Latin America”s second-largest economy, is struggling to rebound from a 1.4 percent gain last year, the slowest expansion since the 2009 recession. Growth has underperformed analyst estimates for eight of the past 10 quarters.
Cheap labor has helped attract $16.1 billion in investment announced by automakers since the beginning of 2010, according to the Center for Automotive Research in Ann Arbor, Mich.
Nissan Motor Corp., Honda Motor Co. and Mazda Motor Corp. have opened factories in the last 13 months. Daimler AG, BMW AG and Kia Motors Corp. plan similar expansions. The new plants will push Mexico”s auto output to 5 million vehicles by 2019 from 2.93 million last year, according to IHS Automotive.
â€œThe cost of the work force in Mexico adjusted for productivity has become much more attractive,“ said Luna, the chief Mexico economist at Citigroup”s Banamex unit. â€œThis allows you to draw more investment.“
While Mexico has surpassed Brazil in auto production this year, Mexican dealers sold 1.06 million light vehicles in 2013. Brazil”s domestic sales were three times as high, while the population is less than twice as much as Mexico”s.
In international trade, Mexico is overtaking Japan this year as the biggest auto supplier to the U.S. market after Canada, according to a report by the Mexican Automobile Industry Association citing Ward”s Automotive data. Total exports of cars, light trucks and auto parts amounted to $54.5 billion during the first eight months of the year, compared with $30.2 billion in oil products, the Mexico City-based trade group said.
Things may be about to improve for workers in the auto industry, said Guido Vildozo, Latin America analyst at IHS Automotive. The flood of investment could cause demand for skilled labor to rise so quickly it”ll put an end to low salaries in the industry, he said.
â€œThere”s a huge question mark if labor will be competitive in the future,“ Vildozo said in a telephone interview from Lexington, Mass.
The government is also starting to take action. Mexico”s National Minimum Salary Commission formed a committee to study ways to bolster the minimum wage, which has plunged 70 percent in the past four decades in real terms and currently stands at 67.29 pesos ($4.93) per day in Mexico City, according to Bank of America.
The committee will present recommendations by the end of April. Adjusted for local purchasing power, Mexico has the lowest minimum wage among 16 major Latin American countries, according to a report by the International Labor Organization.
President Enrique Pena Nieto has pushed through a series of economic laws meant to lift annual growth above 5 percent, including breaking Mexico”s seven-decade monopoly on oil drilling. While investors have applauded his efforts, his public approval levels have fallen to 47 percent, their lowest since he took office and down from a 57 percent high in May 2013, according to Consulta Mitofsky”s latest poll released Sept. 1.
â€œToday we have new conditions that we should take advantage of to grow more, generate better jobs and raise the quality of life for Mexican families,“ Pena Nieto said in a Nov. 5 speech in Mexico City.
The Finance Ministry and the minimum wage commission referred questions about wage increases in Mexico to the Labor Ministry. Alberto Perez, a spokesman for the ministry, did not reply to an e-mailed request for comment.
Velazquez, who is divorced, lives below the poverty line as her monthly income is less than $190 per mouth to feed, according to standards set by the government. Her home with one room and one bathroom, separated by a shower curtain, lacks sufficient space for her children, according to those criteria.
Her daughters, ages 19 and eight, share a child-sized bed with a race-car frame. Dressed up in blue hoop earrings and matching turquoise suede boots as she prepared to take her family to a friend”s house for Sunday lunch, Velazquez lamented she”ll have to start working at a grocery store on weekends to supplement her income.
â€œThe hardest part is leaving my daughters alone for so long,“ she said, watching her older daughter”s eyes ringed in heavy liner well up with tears.
Poor families in Mexico often don”t have access to basic education, health services or paved floors in their homes, according to Coneval, a government agency that tracks poverty, which is at about 46 percent of the population. Mexico”s poverty levels have remained mostly stagnant in the decade through 2012 according to national standards, compared with Venezuela and Brazil, which have both more than halved their nations” poor, World Bank data shows.
â€œWinning on labor doesn”t work,“ said Barry Lawrence, director of the Global Supply Chain Laboratory at Texas A&M University, who conducted a 2011 study comparing the nation”s competitiveness with China”s. â€œIt”s not sustainable and it”s not fair to your people.“
Contact Automotive News
More news from this source:
CAR REVIEWS »
Top 10 Best Chevrolet Models of All Time
9 Unique Ways to Customize Your Car
How to Find the Best Tow Truck Companies
Lifting a Truck Pros and Cons
7 Driving Techniques and Other Tips for Fuel Efficiency
Shady Car Mechanic Tricks You’ve Never Known Before
How to Diagnose Severe Car Problems (Even When You Don’t Know Anything About Cars)
6 Effective Maintenance Tips for Car Headlights
5 Tips for Finding a Good Mechanic You Can Trust
View All Recent Posts
- More Photos