Return to the main menu for MexicoThere is a large surplus of labor in the formal sector of the economy, but much of that surplus is composed of low-skilled or unskilled workers. On the other hand, there is a shortage of technically-skilled workers and engineers, leading to raiding of companies for such personnel.
Due to the surplus of low skilled or semi skilled workers, lower technology industries (such as garments and agricultural produce) are attracted to invest in operations in Mexico. To expand employment and training opportunities, the Mexican government established a maquiladora program, which allows duty free imports of machinery, parts and raw materials for the assembly and finishing of products in Mexico for re-export to the Untied States or elsewhere. Generally, if the parts are of U.S. origin and are not substantially transformed abroad, U.S. import duties are levied only on the value added.
Special incentives are available to companies that set up manufacturing plants within 13 miles of the northern or southern border and the free zones that include both of the states on the Baja California peninsula, Quintana Roo (Cancun), and the northern part of Sonora bordering on the United States. Companies in these areas may obtain up to 100 percent reduction of import duties on machinery, equipment, spare parts, and raw materials for a maximum of ten years from the time they begin operations (32). To qualify, companies must manufacture products not produced elsewhere in Mexico. Mexico also has two free ports: Puerto Mexico and Salina Cruz. Maquiladoras are to be phased out or transformed into normal factory operations for tax purposes by the year 2001.
Unemployment remains a problem, despite the seemingly low unemployment figures released by the Mexican government. While unemployment figures are particularly difficult to come by, with between 2 and 4 percent as generally accepted figures under the more narrow Mexican definition of unemployment as "persons actively looking for work," many observers would say the unemployment rate is considerably higher. Since the definition Mexico uses for unemployed workers is different than that used by the U.S. and most other OECD countries, unemployment numbers quoted by the Mexican government cannot be compared with figures for OECD countries. Underemployed Mexicans, the largest numbers of whom are to be found in the informal economy, and those "seeking employment," are estimated by the Mexican government to be numbered in the range of 12 to 15 percent (33).
The maquiladora assembly industry continued its steady growth and expansion, and by the early 90s there were close to 2,000 plants employing nearly 500,000 workers (34). The full employment of the Mexican border states, where most maquiladora industries are located, contrasts starkly with the pronounced unemployment and underemployment problem of states in most other parts of Mexico. Turnover among workers in the maquiladora industry tends to be fairly high as workers shop around for better benefits or make their way into the U.S. economy.
Under the Federal Labor Law (FLL), workers are entitled to employer-provided training and instruction in their work which permits them to "raise their standards of living and productivity, in accordance with the plans and programs developed by mutual agreement between the employer and the union or the employees, and as approved by the Secretariat of Labor and Social Welfare". For years this provision has been widely ignored but given the challenge of a competitive global economy, the government is urging employers and unions to observe it.
Last update: December 18, 1998.
