The Mexican Economy

by K. Kemper - Date: 2006-12-26 - Word Count: 1323 Share This!

It is a fact that in the past ten plus years, over twelve million Mexican citizens have entered the US illegally, presumably to increase their economic well-being.

In just the last month [November, 2006], some Mexican companies opened up and expected

to have long lines of applicants seeking one of their jobs. The company owners were only slightly surprised that, instead of having thousands of candidates, they had fewer than one thousand and fewer than one hundred of those had the skills needed by the employer.

In an interview with the press after the end of the first week of interviews, the owner indicated that he was not overly surprised that few qualified candidates appeared for an interview; the company was offering the going wages for Mexican help; approximately $1.50 U.S.D. per hour-when the same position [with applicable skills] commanded over $10.00 an hour in the US.

One could stop and hang their head and say "Stupid Mexicans ought to stay in their own nation and be glad to get any work they can." That statement would be short-sighted. Before readers automatically condemn any candidate for work who fails to accept any job offer, we need to do some comparison analysis.

We need to do some international comparisons. [Not counting union wages which often have nothing to do with parity salary levels to skills required.] In China and India, many European and most African nations, salaries are low when compared to those of "dynamic", first-world nations such as Britain, the United States, Germany and Scandinavia where an equally skilled person doing this same type job would earn $15.00 to $20,00 per hour.

This begs the question, why such huge salary differences? Some reasons are: type of government and mandates, quality of applicants, and of course, [the history of] each nation's cost of living.

In many nations, of course, employers can get all the candidates they need at rates well below.

The American/Mexican Peso/Dollar capitalistic system says both "pay as little as you must to get the quality of candidate you need" while concurrently, the other end says "demand the most you can get for the skill you bring to the job."

Now that we have all the economics covered, this author then began wondering why any employer paid what he did and why candidates accepted or did not accept certain salaries and what benefits or negative consequences adhered to the employer offering below medium salaries for said jobs.

While American economists, psychologists and writers have examined the association between wages and performance and attitude and performance, a pattern came forth. While the candidate with great honor and ethics will do his/her best at his job when accepting a given salary, many other employees will work at their minimum level of speed and capability recognizing that the employer is under paying what the general market considers reasonable for any given skill set. Thus, it is a mind set that causes employers the world over to pay below par for any given job. While it is a fact the lower an employer pays in salary for any given job, the more the employer saves. It is also a fact that said savings to the employer are short lived.

As an example, let's take the consequences of American employers of ten to fifteen years ago, closing their American factories and keeping only their national headquarters and contracting "off shore" for goods and services labor that wind up, in the short run, costing the employer less than equivalent jobs would pay in the US.

NAFTA, the agreement between the US, Mexico and Canada, was supposed to usher in instant benefits to its member employers who sought labor at lower [than American] wages. Within twenty four months, Asiatic employers and governments communicated with these same employers and offered even lower than Mexican wages to said employers if these same jobs were sent to Asia.

For a few years, sending jobs overseas appeared to be a God-send to North American employers.

In time, depending on the quality of the goods sought, the "just in time" philosophy used in merchandise buying, this move to Asia began creating problems the American company owners had not expected; longer and longer wait times for goods to be received, no credit offered on mal-functioning goods sold, errors in special orders or even in stand orders-colors, sizes, quality of material and all the other problems that manufactures face. In this case, however, because of the distance involved and the language problems inherent in dealing across most borders, the "instant profits gained" from lower salaries have been ebbing away as customers have voted, with their dollar, to not wait and wait for the suppliers [the American company] to cure customer problems. Even in the rather common use of hiring Indians and Philippines to do customer servicing over the phone or via the internet live chats, the communication problems have only grown worse.

Thus, the early savings gained by some American companies by sending business off shore has eroded and in many cases, disappeared as American customers are refusing to deal with customer service clerks located off shore.

More in-depth analysis must be done to determine why Mexico, Asia, and African nations' employers, pay so little in salaries.

In a close examination of real estate prices, where this paper author is an expert, he discovered that real estate prices in Mexico are not necessarily proportionate to the salary earned-meaning, if a Mexican earned 1/10th to 1/20th the salary of a similar job in the US, one could have assumed that houses of equal size would have been priced at 1/10th to 1/20th of those in the US. Such is not the case. In most cases, the prices are the same!

Next, a comparison of other goods and services' prices between industrial nations and non-industrial nations was done. Again, it was assumed that the lower salaried area had goods whose prices were proportionately lower. Such was, again, not the case.

Therefore, we deduce by examination, that employers do not charge prices in under-developed nations based on the cost of labor, but instead, they charge what an industrial nation employer would charge-thus short-changing everyone.

Let's review this closer.

Simple logic can work here. If a person earns $1.50 an hour and if his cost of living is disproportionate to his salary, he/she lives at the poverty level, not likely to rise above it.

First world employers mostly pay according to the cost of living-in fact, American unions demand it in what is called COLA salary increases; Cost of Living!

When any employer pays at the lowest level he can legally pay, he simply reduces the number of people who can afford to buy his goods [because he is employing and operating in a place where the cost of living is considerably higher than his mean salary]. If he, instead, paid COLA wages, his employees would have immediate higher standards of living, be able to perform better [having better health, etc] and be better educated.

All employers gain more when more people can afford to buy from them.

If Mexican employers would increase their salaries to 1/5th that of industrial nations as a first step towards world parity, the employer would increase sales and profits immediately.

He would do so because of the ripple effect of increased salaries. It is an economic fact that every dollar one earns puts $10 into the economy. Thus, if a person's salary increases from one-half American dollar wages per day to three American dollars a day, that means the employee gains a gross of 6x, and thus, 60x more enters the economy-per employee!

Quickly, more and better health care would "emerge" In less than six months, Mexico would have no citizens needing the higher wages of America, as they would be assured using this mathematical model, that salaries could match those of America within two to three years as the economy reacted to the increase dollar flow into the economy. Even more good would occur if the massive corruption of Mexican government officials could be quelled and the narcotic trade ended.

Related Tags: mexico, entrepreneurs, socialism, capitalism, parity wages, unions

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