Disrupting the Mexican Labor System

Thanks to the legislative, economic, political and social changes undertaken by Mexico 16 years ago, the country entered a new era. However, labor law was one of the subject areas that remained long overdue for a much-needed change. The Labor Reform, approved unanimously by 17 states in February 2017, will disrupt the entire Mexican labor market, says Tomás Natividad, Director of Natividad Abogados.

Among the most important changes are modifications to the union system in the country, rules for collective employment contracts and the nature of Conciliation and Arbitration Boards. “Mexico has enjoyed a solid legal framework for workers that has guaranteed industrial and labor peace for over 86 years. The new reform aims to further this peaceful condition while creating a deep change in the Mexican labor system.”

In Mexico, the right to form unions and participate in strikes goes back to the first years after the Revolution, but its insertion into the political system has given workers an enviable position that permits them to sometimes even hold companies captive. “Theoretically, workers must choose unions, not companies. However, in Mexico this does not happen, because businesses are forced to choose a union even before its operations start.”

Natividad says the changes that will come will hurt neither workers nor companies, but will diminish the power of unions. “A union should be an association of workers constituted for the defense and improvement of their interests. It should increase the bargaining power of workers to match that of its employers.” Unions and collective hiring were intended to protect workers and obtain benefits exceeding those contemplated by the law, but Natividad says the country’s new reality calls for a change in the role they play. “Today, big companies enter the country offering contracts with labor-market benefits; other types of benefits are contingent upon results and merits. That is the modern labor market.”

While the change regarding unions has been among the most overdue tasks for the Mexican legislative system, according to Natividad another key component will revolutionize the system: the minimum wage. In 2014, Miguel Ángel Mancera, Mexico City’s mayor, presented a proposition to increase the minimum wage from $67.3 to $171.3 pesos by 2018. The proposal was received with mixed reviews from the government, business leaders and scholars and even fueled a response from Banxico’s Governor Agustín Carstens.

Mancera’s proposition was not fruitful, but it unleashed a public discussion on the value of Mexican wages and led to a series of coordinated actions between the government and the private sector to increase wages. According to Natividad, the National Commission on Minimum Wages had started a wages unification process in 2012, but not much could be done without authorities untangling minimum wages from federal and local legislations. “We could not move minimum wages as Mancera wanted. There were 680 legislations that were calculated using the minimum wage, ranging from fines, administrative sanctions and social security contributions up to financing for political parties.”

To resolve the issue, the Unit of Measurement and Update (UMA) was created. The UMA is intended to provide a reference value for legislations that used to depend on the minimum wage. “It was not until the UMA was created that the Commission was able to work on strengthening the value of wages,” says Natividad. “To recover the value, we have created an Independent Sum for Recuperation (MIR) that is added to the value of the wages in addition to the projected inflation rate. We plan to increase the number of MIRs to the minimum wage in a manner that is consistent with the performance of the Mexican economy. We expect minimum wages to surpass Mancera’s expectations, but not by 2018.

Big changes are sometimes hard to see, particularly when it comes to revamping the country’s basic scaffolding. However, once all the changes are applied, ordinary citizens will witness improvements. “It is a matter of time, but rules and things will change,” says Natividad.