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Analysis

Technology, Globalization Call for Change in Labor Environment

Wed, 05/08/2019 - 10:35

Mexico has banked on its low-cost landscape to attract investment and position itself as a manufacturing hub. But what worked before will not necessarily carry into the future. This is the juncture at which the country finds itself. “We cannot deny we are a manufacturing country. However, we need to change this mindset and become a hub for technology innovation and knowledge generation. This will lead to an increase in competitiveness and productivity,” says Gabriel Aparicio, Country Manager of Kelly Services. 
The implementation of Industry 4.0 practices in many of Mexico’s economic activities has shone a spotlight on the need for change. According to the World Economic Forum (WEF), the future of the working environment will endure three different stages: technological change, learning evolution and talent mobility. WEF estimates that between 2015 and 2020, 7.1 million traditional jobs could be lost due to disruptive changes in the market stemming from Industry 4.0. Jorge Pérez, CEO of Grupo PAE, believes there is a pool of talent that will not be able to get a job because of the lack of experience regarding the most elementary digital skills. “If someone does not know how to handle a computer, that person’s employment opportunities are reduced. This represents a huge problem because we have a critical mass of talent that, unfortunately, has not been developed due to a lack of opportunities.” Pérez adds that this is a common phenomenon across Latin America. 
José Raul Guerrero, President of Mexico and Central America at Korn Ferry, says the changes generated by Industry 4.0 will irreversibly alter existing work dynamics. “All jobs considered mechanical or repetitive will disappear if they can be automated or solved through AI. We have not seen the whole scope of this transformation,” he says. “It is very hard to define what is going to come in terms of employment … but it cannot be denied that companies need to reinvent themselves to understand technology and how to compete in this environment.” 

SOFT-SKILL DEVELOPMENT

The evolution of skills and education is impacting all academic institutions in the country. Carlos Prieto, Dean of EBC, says educational institutions must focus on two areas: adapt their study programs to the new industry realities and teach their students soft skills rather than hard skills. “Our main challenge is to offer education that can adapt to the jobs that will appear in the coming years. We have realized that hard skills are not so important, since what we teach students today may be very different from what they will need in five years.” Regardless of the change that might come, Prieto says all students must develop leadership, problem-solving and innovation capabilities. “What we really need to do is help our students develop skills that allow them to adapt to any kind of job.”
A full transformation of the working environment, however, would not be complete without a change in the country’s labor legislation to allow for talent mobility or flexibility. “Organizations and institutions need to start a re-education process to break the stigma regarding flexible work,” says Aparicio. “Work flexibility helps organizations to complement their existing workforce.” Talent-related companies have long demanded changes to the labor law. It was not until the signing of USMCA and other international agreements, such as TPP11 and the ratification of the Convention 98 of the International Labor Organization, that this became part of a more mainstream discussion. “Mexican law is emulating the US model … the labor reform we will experience is a response to international paradigms more than the will of internal players. Labor law has stopped being a local issue,” says Oscar de la Vega, Managing Partner at De la Vega & Martínez Rojas. 
Labor environment and conditions also put Mexican wages under the spotlight. De la Vega says that for many years, one of Mexico’s selling points was its low-cost labor force. This has taken a toll on the country’s social tissue. “Since 1994, the country’s low labor cost has been presented as a selling point for investors but this is no longer sustainable. We need an integral work policy that provides added value to the workforce,” he says. 
As worrisome as wage conditions are, the steps taken by the current administration regarding wage increases by decree go against the country’s free-market logic and could create a more serious problem for its economic units. “Individual salaries should be linked to each person’s performance and not to the minimum established as the national average. The new government’s proposal of increasing the current minimum wage without taking into consideration inflation will create a significant economic unbalance,” says César Maillard Cárdenas, Partner at Maillard Abogados Laborales.