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News Article

Mexican Productivity Has Been Stagnant for 32 Years

By Miriam Bello | Fri, 03/18/2022 - 09:27

Labor productivity in Mexico has been stagnant for 32 years, causing the country's economy to grow in "slow motion,” said a World Bank report. The agency based its results on the last six Economic Censuses, which were carried out between 1994 and 2019. However, productivity accelerated during 2020, only to slow down again the following year.

Labor productivity is measured as the increase in production that cannot be explained by greater accumulation of resources. However, it can also be measured with a purely labor approach: what a worker can produce with one hour of work. Productivity matters because the economic growth of middle-income countries can only occur if available resources are used more efficiently. Labor productivity growth is generally associated with higher wages and better working conditions. In the long term, increased productivity is key to economic development.

In 2020 Mexico’s productivity grew by 6 percent but shrank by 1 percent in 2021, reported MBN previously. The 2020 increase was the fastest global growth in hourly productivity seen since data became available, according to the  ILO. The 2021 decrease was associated with exhaustion after excessive workloads during the COVID-19 lockdowns.

"Companies need to be very careful with productivity because the workforce is depleted. If they do not implement the necessary measures, personnel turnover may begin to occur in the upcoming months, especially now that more businesses have resumed operations, adding more employment options for workers to choose from," said Jorge Izquierdo, CEO, PAE Global. For companies to attract and retain talent, Izquierdo suggested offering a flexible work scheme with a competitive salary.

Strategies to retain talent and maintain productivity changed after the COVID-19 pandemic. Trends now include flexible modalities to foment employee productivity. For example, 77 percent of those who work remotely at least a few times per month show increased productivity, with 30 percent doing more work in less time and 24 doing more work in the same period of time, according to a survey by ConnectSolutions.

Aside from flexibility, other aspects such as training and career development opportunities, healthy working environments, positive processes experience, diversity, tools and workplace ergonomics are also critical, according to Qualee. Moreover, employee wellness and tech integration became fundamental to ensure more productive processes.

Additionally, and considering Mexico’s diverse employment opportunities, the World Bank’s report recommends promoting competition and expanding access to finance to support faster productivity growth. The organization also supports the reduction of regulatory barriers and a reform of the bankruptcy regime to encourage business growth and liberalize trade in services. Finally, the World Bank urges the country to improve logistics to take advantage of Mexico's participation in global value chains.

Photo by:   kris on Unsplash
Miriam Bello Miriam Bello Senior Journalist and Industry Analyst