June 13, 2008

The Working Poor in Mexico No Rest for the Working Poor

By Laura Carlsen

Globalization continues to break down its own myths, especially in developing countries.

In Mexico, the promise of more jobs withered shortly after NAFTA went into effect, when it became clear that displacement outpaced job generation. Now, its twin promise—that globalization would create better jobs and improve standards of living—has finally committed public suicide as well.

Ford and General Motors change their operations in Mexico. Ford announced a major investment in Mexico of over $2 billion this week. Alongside the self-congratulatory remarks of industry representatives and government officials, was an interesting tidbit of information. According to an AP report, at the Ford plant to be expanded in Cuautitlan—on the outskirts of Mexico City where the cost of living has been going up sharply—workers' wages would be cut in half from their current level of $4.50 an hour. Mexican union leaders stated that this was necessary to compete with China.

The same week, General Motors announced a $1.3 billion investment in its Coahuila, Mexico plant and the creation some 875 jobs (note the low job-to-investment ratio). It also announced the eventual closure of plants in Janesville, Wisconsin and Morraine, Ohio. The Mexican press noted that the company first hinted at the closure of its plant in Toluca, which elicited an immediate promise from the union leadership to accept wage reductions. It soon after announced it will remain open but cut back on operations and lay off some of the workers. Although the new contract terms were unavailable at the time of this writing, the trend is written on the wall.