When the North American Free Trade Agreement was inked in 1993, it was thought that it would help bring Mexican wages up to par with those paid to workers in America. However, at least in the auto industry, the exact opposite has been the result.
With the auto industry more global than ever, inexpensive labor from developing countries is driving down labor costs at an ever increasing rate. We’ve seen that here in the U.S. with the newly passed two-tier wage system, and now similar reform is being passed in Mexico.
Although Ford ’s pledge to build the Fiesta in Mexico will create about 4,500 new jobs, it doesn’t come without sacrifice to the Mexican workforce. Union workers at Ford’s Cuautitlan plant outside of Mexico City currently make about $4.50 an hour, but agreed to a new two-tier wage system — that will see new hires make about half that — in order to secure Fiesta production.
“We agreed to it,” Ford union leader Juan Jose Sosa Arreola told Automotive News. “We need to be more competitive. That’s the truth. That’s a reality.”
Some Mexican auto workers make as little as $1.50, with it taking seven years to work up to what used to be starting wages only a few years ago.
But many analysts now feel that Mexico has a distinct advantage over other cheap labor markets. Mexico is very close to some of the world’s largest auto markets and, over the past few years, has built an extensive network of local suppliers. Between 2004 and 2007, Mexican auto exports climbed 68 percent, totaling 1.6 million units.
But even with that advantage, Mexico’s auto workers aren’t seeing any benefits. Mexican labor laws heavily favor employers over employees, and most unions are limited to specific automakers or plants, unlike the U.S.’ national UAW. And with an abundant workforce and the automakers’ need for cost cutting, it doesn’t look like things will change anytime soon. “Despite the fact that we’re negotiating what you could call a cheaper contract, I guarantee you that if we advertise for 2,000 workers, 10,000 people are going to show up,” said Arreola.
