International minimal wage

[timelets]

Trump acts like a typical communist because he imposes workers' rights requirements in a treaty with the government of Mexico:

...a new rule mandating that 40% of an auto qualifying for tariff-free trade in the region has to be produced by workers earning $16 an hour. Mandating wage rates ignores the relationship between productivity and output and sets a bad precedent for future trade deals. Mr. Trump is using the mandate to make Mexico less competitive for car production.

https://www.wsj.com/articles/north-american-damage-control-11576444915

Comments

[juan_gandhi]

Same thing happened when the US refused to by Soviet hydroturbines, claiming price dumping.
I wonder if it works with China.

[timelets]

The minimum wage in China is about $50/month. When it comes to exports, the governments subsidizes market share or growth, rather than local wages.

[gomberg]

One thing that is usually forgotten in this entire discussion about Mexican wages and union rights is that Mexican labor law is, actually, extremely pro-worker. In particular, a regular worker pretty much cannot be fired at all, except in case of the company simply going out of business. People like me are classified as "confidence employees," who can be fired - but at a cost of a large monetary payment. But regular factory workers can insist on reinstatement, and the law is usually on their side. These protections are, in fact, based on constitutional provisions and have been an intrinsic part of Mexican law for generations. In fact, these protections cannot be avoided even if people work off books: failure to have a written contract does not prevent the employment relationship from being recognized by the courts. While the capacity of the courts to enforce the law is, of course, somewhat limited, this being Mexico, they, actually, do try: and people do sue. It is certainly true that firing workers is hugely costly for employers here. In that sense, Mexican labor law is much stronger and much more pro-woerker than its US analog.

On the other hand, of course, these laws have meant that Mexican employers avoid hiring employees directly, heavily relying on "outside contractors". The new rules will, of course, encourage this practice even further. The relatively few workers on staff will be defined as producing the cars, while anything that could be defined as "services" to the factory will be done by outside contractors, not subject to the regulations.

[timelets]

Very interesting. I would never think that labor laws in Mexico protect workers, rather than employers. Moreover, I would venture to think that a majority of Americans share this opinion. Therefore, it seems "logical" that the US should impose labor standards on Mexico as a condition for a trade deal.

In any case, making it very difficult to fire employees may not be good for experimenting with new business models. I know that European countries like Germany, France, Italy and others are really struggling with the situation.

[gomberg]

Why would that surprise you? Mexico was the most durable socialist dominant-party state for most of the 20th century. Not only was the Mexican Revolution at the time perceived as the main precursor for the Russian one (John Reed was not the only one to travel between the two countries documenting the goings on), but also the regime it created stayed in power effectively till the year 2000. And, of course, given that it ended in elections, rather than any sort of a revolt, there was never a hard break between the revolutionary state and the current Mexican polity. The labor protections are the integral part of it. BTW, you might also be surprised by the fact that Mexico has a well-developed, if rather intricate, system of publicly provided medical care historically linked to legal employment (though partially decoupled from it in recent years in order to make it near-universal).

The US these days, somewhat paradoxically, concentrates on union rights even more than on wages. It does play well with the union types north of the border, but even there things are less than straightforward. Mexico has historically had extremely strong unions, which also arose in the post-revolutionary period. But these unions for decades were very much part of the governing regime. To make it clear, they were not enslaved by it, as in the Soviet case, but an integral part of the effective ruling coalition (which the governing Institutional Revolutionary Party was). In fact, having been established in their classic shape back in the 1920s and 1930s they were quite agressive towards the original private sector employers and remained a force that the government had to very much reckon with even in the nationalised industries for decades thereafter and even today.

The problem, therefore, is not that Mexico does not have unions: they are still much stronger than in the US. The problem is that these unions frequently act not for the benefit of their rank-and-file, but for the benefit of their established leadership and/or of the related political interests. True, they are less powerful (or sometimes even non-existent) in newer manufacturing industries, but, in the end, they are very much present and receive substantial rent (whether it is shared with workers is another matteR).

What the labor reforms insisted on by the US have done is introduce greater democracy and competition into the unionization process. Whether these remain more than paper declarations is still to be seen. But, if anything, it is far from obvious that these things would make Mexican labor more expensive to the employer. They should (or, should I say, might) increase the share that the worker gets: but that share does not have to come from the employers. Many Mexican reformers have latched onto the US demands in order to obtain these reforms. This is, perhaps, one of the better consequences of the negotiation process.

[timelets]

Thanks for the tour. I have to admit that I'm basically ignorant about Mexico and its history.

Few years back, I read a paper showing that for an Asian country increased trade with low-corruption countries reduces local corruption. It's quite possible that trade has a similar effect on labor relationships, although it's hard to imagine that American trade unions in their current weakened state can have a significant impact on Mexico. The new generation of manufacturing workers just don't see themselves as union members - huge contrast with, e.g. Germany or France. Is there a similar generational divide in Mexico?