High-Productivity Poverty Is Too Costly

Now that the dust is beginning to settle on the remarkable implosion of Mexico’s one-party state, the man who set the charge, President-elect Vicente Fox, arrives in Washington to meet with President Clinton and Vice President Al Gore today and then flies to Dallas to meet with Gov. George W. Bush on Friday.

Fox is proposing a bold redefinition of the U.S.-Mexican relationship, arguing that “we must be better friends, we must be better neighbors, we must be better partners.” He has already raised a long-term goal of something akin to a North American common market that includes the free movement of people as well as goods across the continent. He maintains that the U.S. economy is already heavily dependent on Mexican immigrant labor and that the U.S. government is spending billions to keep out the very people U.S. industry is often desperately trying to hire.

Fox acknowledges that an important impetus for Mexican immigration is his country’s extreme income polarization and desperately low wages. Nowhere is the problem more sharply drawn than at the U.S. border, where workers in Mexico’s high-tech export plants, or maquiladoras, earn less than $1 an hour. At night you can see the gleaming lights of downtown San Diego from Tijuana, and the lure of earning a day’s pay for an hour’s work of busing dishes or cleaning houses often proves irresistible.

“It is not possible to solve the migration problem,” Fox said with characteristic candor, “if we don’t solve the gap where a worker in Mexico earns $5 a day, and a worker in the United States makes $60 a day.”

The low wages at the border define a perverse new oxymoron: high-productivity poverty. The workers in these export plants produce computers, televisions and automobile stereos with world-class quality and first-rate efficiency, yet they are paid wages on which they can barely subsist. Why are wages so low? They reflect the policies of previous Mexican governments to attract investment, especially through an arbitrary enforcement of Mexican labor law that squelches independent unions.

The promise of the North American Free Trade Agreement was that expanded trade and increased employment would bring labor rights in their wake. U.S.-Mexico trade has doubled and so has maquiladora employment, to more than 1 million workers, but labor rights remain nonexistent. The NAFTA side agreement on labor documents the problem, but it is far too weak to do anything about it.

The issue is not U.S.-Mexico economic integration--that is a reality, is vital and is growing rapidly--but how best to manage it. “I don’t think the market, by itself, will do the job,” Fox, a firm believer in the power of markets, admits. “This job has to be done by the intelligence of people, by the intelligence of governments, by the talent of our nations.”

Fox understands that a North American common market is not on the political radar in the U.S., but, then again, neither was his own election on the radar in Mexico. A first step is to develop a social compact of the Americas, an important part of which deals with labor and immigration issues.

As a start, Fox would pledge an open, fair and effective enforcement of Mexican labor law so that workers could win the right to have independent unions--if they chose--and free collective bargaining. This bold executive gesture would extend the remarkable democratic reforms of Mexico’s political process to its citizens in the workplace. Firms in Mexico would not become less competitive. Their productivity and innovation are enough to sustain higher wages. However, Mexican workers would finally share in the economic miracle rather than simply producing it. All of Mexico would benefit, and many of the country’s most enterprising workers would have the opportunity to improve their lot at home rather than making the risky trek north.

In turn, Fox would ask the U.S. Congress to pass an amnesty for the estimated 6 million undocumented immigrants living and working in the U.S. today and ensure that the rights of all workers--documented or not--are protected in the workplace.

Finally, better monitoring of labor issues is vital to economic integration. Mexico, the United States and Canada would agree to modify the labor side accord to NAFTA to include the right to freely organize and bargain collectively and to provide real sanctions for their violation.

A unique moment exists today to redefine the U.S.-Mexico relationship so that ordinary citizens on both sides of the border can share in the gains. A social compact of the Americas would be a modest step in the right direction.