A recent article appeared in Bloomberg News noting that Mexico raised its forecast for direct foreign investment for 2011 by 11% to $20 billion. This suggests good investment news for Mexico. Because the article noted low Mexican wages as a contributing factor impacting foreign investment (i.e. factories locating or re-locating in Mexico in part because of the attractive low labor costs), a left leaning colleague noted, “Yeah, but it’s because of the low wages,” and then queried, “Is that good news?”
The answer, it is strongly suggested, is a resounding “yes.”
Mexican Wages, Education and Emigration
Emigration of Mexicans to the United States, and to a much lesser extent to Canada, is a function of lack of work in Mexico. That is, unemployment is the culprit more so than low wages. The US economic crisis is turning the tables somewhat, causing many to return to Mexico. The result is more Mexicans now competing for work which was not available in the first place. Thus, petty crime out of economic necessity increases.
Education is a problem in Mexico, more so a lack of education and illiteracy than quality of education -- although quality of education is problematic in many Mexican states. Throughout the poorer states such as Oaxaca, Chiapas and Guerrero, where there is more economic pressure on single parent families (as a result of male emigration), there is a greater likelihood that children will not be in school since survival dictates that they become wage earners rather than continue on as students. Truancy is not enforced, at least in states such as Oaxaca.
How Foreign Owned Factories in Mexico (direct foreign investment) Hiring Cheap Labor Benefits Mexico
Direct foreign investment in Mexico benefits Mexico in two significant ways. It provides domestic work for otherwise unemployed Mexicans, and leads to positive socio-political change.
One must remember that low wages are only a part of the equation, and while at first blush one might want to argue rich Americans and Mexicans are taking advantage of a cheap Mexican labor pool, there is a corresponding lower cost of living in Mexico. In those Mexican states where incomes are a fraction of those in the US, the cost of living is also significantly less.
New foreign-owned factories in Mexico means more work for Mexicans otherwise unemployed or predisposed to emigrate north in search of work. More employment means less crime. More employment translates to more two-income families, which results in less economic pressure on families. With less economic pressure on Mexican families, there is a greater likelihood that children will remain in school since there is less need for children to become wage earners.
Mexican children then have an increased opportunity to become educated. In Mexico, education does not, at present, necessarily result in better work for high wages, at least not nearly to the extent that the equation holds true in the US. However, education does provide the populace with the tools and time to think – and an opportunity to reflect on Mexico’s socio-political system. As the left-leaning colleague would reasonably argue, one focal point would be on the inequality between rich and poor. Thus, positive social change has a better change to seize the imaginations of the masses, now better educated.
And it’s all thanks to increased direct foreign investment in Mexico.
Alvin Starkman - Alvin Starkman runs Casa Machaya Oaxaca Bed & Breakfast. He is a paid contributing writer for Mexico Today (http://www.mexicotoday.org).
