Two decades of labour flexibilisation in Mexico has left workers facing “drastic” precarity

Artemis is now 60 years old and started working when she was a teenager. She has been in formal employment for 38 years, with a few brief interruptions, and is still working. Her salary is not as good as it used to be: she no longer receives basic benefits such as medical care, and her chances of retiring are zero, due to the peculiarities of Mexico’s legislation. She has worked in both the public and private sectors and the law does not allow her to accumulate those years of work, to provide her with an income during retirement.

The increased labour flexibility resulting from various legal reforms in the last 20 years has left a significant percentage of Mexican workers in a precarious situation.

“The situation is drastic. Absolutely all rights have been lost. Given the lack of employment opportunities, people seeking work do not pick and choose; they simply take what they are given, even if it comes without benefits or the most basic social security,” says José Alfonso Bouzas, a member of the Economic Research Institute of the National Autonomous University of Mexico (the largest in the country) and an expert in labour law.

The researcher explains that the situation is not simply the result of the recent legal reforms. “It is the reality on the ground that has been deviating from the legal rules since the 1980s. Outsourcing was already a reality before the law was reformed, for example, and although safeguards were put in place to protect workers, the authorities themselves issued instructions not to apply them, because there was a significant level of disgruntlement among employers. Mexico was already a ‘labour haven.’”

The many years of stagnant economic growth that followed the 2008-2009 crisis have stymied the much-needed increase in sources of well-paid employment. And the low wages on the Mexican market have been the greatest draw for foreign investment in the country’s manufacturing sector, especially within the framework of the North American Free Trade Agreement (NAFTA).

In 2012, the Mexican Congress approved one of the various labour reforms that has made contractual arrangements more flexible (‘trial periods’, ‘initial training’, part-time contracts and, although the possibility already existed, subcontracting or contracting through third parties – outsourcing – was regulated), with a view to “opening up sources of employment and improving productivity”.

The Mexican constitution, adopted in 1917, was internationally recognised as being a trailblazer in the field of social rights. But in the view of Manuel Fuentes, one of the best-known labour lawyers in the country, the Federal Labour Law, which regulates the relationship between workers and employers in the private sector, has commodified that relationship, severely weakening social rights.

According to a study about to be published by the Human Rights Commission of Mexico City, prepared by consultant Germán Reyes Gaytán and made available to Equal Times, precarious employment relationships are already a reality in Mexico, as illustrated by the level of unemployment, informal work, the loss of purchasing power and the lack of labour justice.

Aleida Hernández Cervantes, also a researcher at the National University, explains that job insecurity and uncertainty, the lack of protection and the inability to take part in determining working conditions, are all features that point to the existence of precarious work.

“The many and varied features of precarious employment include temporary contracts of varying duration, lack of clarity regarding the identity of the employer and difficulties exercising union rights,” she says.

This is also reflected in the new OECD Employment Strategy, released by the Organization for Economic Cooperation and Development on 4 December, which states that while growth requires policies that promote flexibility in labour and product markets, these are not sufficient to deliver positive outcomes in terms of the quantity and quality of employment and inclusion.

Millions of Mexicans are no longer even looking for work – there is none

The official unemployment figures are deceptive. While unemployment fell from 4.94 per cent to 3.88 per cent between 2013 and 2016, the indicator for people who had stopped looking for work was 16.09 per cent.

The study of the Human Rights Commission points to the alarming fact that, in 2016, out of an Economically Active Population (EAP) of 53.68 million people, 2.1 million were unemployed and another 5.8 million not only had no work but had stopped seeking employment “for various reasons”.

In addition, the International Labour Organization (ILO), in its 2017 Labour Overview of Latin America and the Caribbean, noted that the reduction in the unemployment rate in Mexico was not the result of greater job creation but, rather, a decrease in the labour force participation rate.

This situation could be made worse by the austerity measures already being implemented by the new government headed by leftist president Andrés Manuel López Obrador. Plans have been announced, for example, to dismiss 2,000 workers from the Senate of the Republic (64 per cent) and 3,000 from the Chamber of Deputies. The agency in charge of collecting taxes called for 1,000 voluntary resignations, whilst trying to avoid forking out the statutory redundancy pay.

The social security institute for public sector workers, the ISSSTE, has announced 3,000 job cuts, and its counterpart in charge of private sector workers has also announced restructuring plans, although no precise figures have as yet been provided. Jobs in the public education sector are to be cut by 30 per cent. And the list goes on.

With regard to salaries, according to information quoted by former congresswoman Araceli Damián, Mexico has fallen behind other countries over the last 20 years, with the average wage in the manufacturing industry in China having tripled between 2005 and 2016, reaching US$3.60 an hour, whilst in Mexico it fell from US$2.20 to US$2.10 an hour.

And while real wages in most Latin American countries increased, according to the aforementioned ILO report, in Mexico they declined. The new OECD Jobs Strategy points out that Mexico has the lowest wages of all member countries, with average gross hourly earnings of US$4.60, compared with the overall OECD average of US$16.60.

On 17 December 2018, the new government announced an increase in the minimum wage from US$4.39 a day to US$5.10, which represents a 16 per cent rise, and a doubling of the minimum wage in areas close to the US border. Around eight million workers, 6.66 per cent of the population, will benefit from this rise.

Informal sector employment, according to the analysis of the Human Rights Commission, shrank slightly, from 27.03 per cent in 2013 to 26.3 per cent in 2016. The percentage nonetheless continues to be a serious cause for concern, reports the study, “as it reflects a constant and alarming level of precarious employment” in the form of part-time jobs, casual or informal jobs or unpaid work in family businesses, which are the only options available to many workers in Mexico, given the lack of decent employment opportunities.

Outsourcing and the erosion of health insurance

Access to health care used to be one of the basic social guarantees available to those living off their labour. The experts who drew up the report of the Human Rights Commission note that, in the past, the idea that salaried employment would not be coupled with access to health care would have been inconceivable.

Today, health insurance is no longer a given for a significant portion of the workforce in salaried or formal employment. In 2013, the number of formal workers without access to health services was approximately 15.08 million, out of the little more than 33 million people in employment.

And despite the rise in the number of salaried workers, the number of people without health care also rose. The number of salaried workers was 35.26 million in 2016, but 15.97 million of them did not have access to medical care.

The hiring of workers through third parties has also contributed to the rise in precarious employment. The study published by the Human Rights Commission indicates that this method of hiring has increased more markedly in recent years, rising from 8.6 per cent of people employed in 2004 to 16 per cent in 2014, according to official data.

The problem is that a significant percentage of these employment intermediaries do not report the workers’ actual wages to the tax authorities (in order to lower the costs of their services) or to the institutions in charge of social security, thus also reducing the contributions they have to pay to these authorities.

Although this may be seen as beneficial for the workers too, as the amounts they have to pay in taxes and social security contributions is also less, it is not, in fact, the case, given that benefits such as the Christmas bonus or sick pay are calculated on the basis of the wages reported.

It is for this reason that a senator, who is also a union leader, recently announced his intention to promote a legal reform to prohibit outsourcing, raising concerns among employers.

Young people and the new administration

The Employment and Minimum Wage survey, conducted by the Centre for Social Studies and Public Opinion (CESOP) of the Mexican Chamber of Deputies, reported that 72 per cent of workers in the country said their situation had deteriorated in the last three years, as a result of the cuts in employee benefits and wage income.

Out of the 45 per cent of workers who reported having a job, 19.9 per cent said they received the legally-established benefits, 16.2 per cent received no benefits at all, 6.1 per cent received higher benefits than those established by law, and 2.6 per cent had some benefits but were hired under contractual arrangements that did not establish a relationship with their employer.

The 2018 Wage Observatory Report, conducted by the Ibero-American University (an institution run by Jesuits, recognised for their concern for social and human rights), reports that 50.6 per cent of young people (between the ages of 15 and 29) receive no benefits of any kind. And 66 per cent of the young salaried population has no social security.

“The labour flexibility trend has been growing in Mexico since hiring arrangements were relaxed under the 2012 Federal Labour Law reform, leading to a state of permanent precariousness among young workers, which is on the rise,” says the report.

In 2017, only 13.6 per cent of young people had access to paid leave, Christmas bonuses or credits for housing.

An additional problem is the young people who are not in employment, education or training, known as ‘NEETs’ (Not in Education, Employment or Training). The new government has launched a special programme, ‘Young People Building the Future’, aimed at training this population group for work.

Employer-backed ‘protection’ unions

This growing precariousness has, to a large extent, been obscured by so-called union leaders (from big confederations such as Confederación de Trabajadores de México -CTM- and Conferederación Regional de Obreros y Campesinos -CROC-).

Labour expert Manuel Fuentes characterises the role of trade union leaders in Mexico as follows: “The union leaderships, headed by caciques, have no respect for the will of the workers. For them, they are masses and objects like anything else. The leaders are part of cliques with total control over their union’s money and assets, their electoral processes and even the will of the workers, under the threat of putting them out of work, or simply telling employers not to recruit them, or to get rid of them, on any pretext, or to suspend their union rights or dismiss them without justification. They also resort to threats, beatings and even murder. In some cases, the union caciques manage to take control of the institutions where their members are employed.”

This setup dominating the Mexican trade union movement was built up over 70 years, during which the main labour unions were organically linked to the PRI, the party that ruled the country during most of the last century, followed by the right-wing National Action Party, from 2000 to 2012.

National University researcher Aleida Hernández Cervantes, points out that this relationship between the Mexican State and trade unions did not give the grassroots any say in the decisions of the public authorities, “as it was only the union leaders who ensured their inclusion in the governing coalition by mobilising and controlling the rank and file to ensure support for the governors in office, while the exercise of rights such as unionisation, internal union organisation and strikes was limited”.

She argues that although the links between the corporate unions and the Mexican state have not yet been dismantled, there are various signs that they are being weakened: “The fall in unionisation rates is one sign of this weakening. By 2012, the union membership rate was just 8.8 per cent of the total economically active population and 13.9 per cent of salaried workers. One of the reasons behind this is the proliferation of individual contracts that prevent workers from joining trade unions,” she says.

The employer-backed protection unions have also contributed to undermining workers’ representation through genuine trade unions. An estimated 90 per cent of the collective agreements – which should be the product of collective bargaining between the unions and the employer – registered with the labour authorities, are collective employer protection agreements resulting from sham negotiations between a fake union and the employer, which chooses the organisation on the basis of its unconditionality. Such organisations are referred to as ‘protection’ unions, because they are formally set up and registered with the labour authorities with the purpose of “providing a service” to companies seeking to avoid genuine collective bargaining, explains the researcher.

There is a mix of light and darkness on the current labour scene. In addition to the increase in the minimum wage and scholarships for young people who are neither working nor studying, ordered by the new president, the Supreme Court has ruled that domestic workers have the right to social security. The Mexican Senate also recently ratified ILO Convention 98 which guarantees the right to freedom of association. In contrast to this, government employees are already being dismissed in their thousands.