Facing Mexico's Labor Challenges

Q: How do you see Mexico’s Labor Reform shaping up and what factors should be considered in its formation?

A: Public policy should focus on the creation of employment. The reform should support recruitment systems and include fiscal stimulus. The systems should also facilitate a possible breakdown between employee and employer. The included fiscal stimulus should be strong and promote formal employment but it should also gradually transform informality into formality. Also, meritocracy should be implemented and we must change from utility distribution to performance bonuses. The government should incorporate these types of public policies in the reform to create more employment and provide legal certainty. Mexico is the favored Latin American destination for foreign investment and we must emulate more developed countries. Germany and the Netherlands, for instance, employ more outsourcing. Employees are hired by specialized recruiters so companies can focus more on their core business. Developed countries are also more focused on the creation of software, technology and services, while emerging countries, where labor is cheaper, concentrate on manufacturing. However, providing legal certainty to local and foreign investors will create more employment.

Q: What are the challenges that Mexican companies face under the current labor law?

A: The law does not say that we require collective labor contracts, but in Mexico a union is allowed to call a strike to get them. We hope the Labor Reform addresses this and changes it. Ninety-eight percent of companies in Mexico are SMEs, so if a small company loses a claim against an employee it automatically loses its business. The Federal Labor Law under which we are working is a very high-risk legislation.

Q: What steps is the country taking to normalize its informal economy?

A: The STPS hosts various activities with the private sector, unions and the International Labor Organization to address this. There have been many studies on how to reduce informality but under current conditions it will take a long time to apply the results and recommendations. In Mexico, 40 percent of employment is formal and 60 percent is informal. A large portion of the population does not pay taxes, something that does not happen in developed countries. We are also working with the STPS on boosting competitiveness through a project that should be ready in 2017.

Q: Mexico has a strong union tradition. How must labor unions adapt to the new social and economic conditions in a changing country?

A: The upcoming Labor Reform will incorporate a series of requirements that will be almost impossible to apply. It will be very hard to register collective agreements, soconfeder unions will have to be accredited and keep all their documentation in order. Every employee should be aware of unions but many do not know their rights and there are not enough talented union leaders who can correctly implement the collective contracts using the right processes. The new reform has the right spirit but the interesting part is how it will be applied and how the private and public sectors can participate.

Q: Trade unions have always been highly politicized in Mexico. How can the law eliminate the relationship between unions and political parties?

A: The law has already eliminated this but several unions have always belonged to a party, like the Confederation of Mexican Workers (CTM), the Revolutionary Confederation of Labor and Farmers (CROC) and the Mexican Regional Labor Confederation (CROM), which belong to PRI. The rest, called independent, do not belong to a political party but we see social movements that are associated with unions to maintain their activities. The big unions have always been related with the government. It is inevitable and in fact, we have many leaders who belong to unions.