The Politics of Pay, Unjust and Flawed

The following article was written by Napoleón Gómez Urrutia, and originally published in Spanish on October 30th, 2014 in La Jornada, Mexico City’s leading daily newspaper, considered by many scholars as one of the last remaining independent newspapers in the Americas.

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A proper policy on wages cannot be divorced from a government’s employment policy and this, in turn, needs to be part of an overall strategy towards promoting economic growth. Such a strategy should benefit the majority, with new opportunities for all as opposed to a mere subset of society, as was the case in recent decades and has become even worse over the last few years.

By using a bit of common sense to look at what has happened to pay over the last 30 years, you don’t need to be an expert or Nobel laureate in economics to realise that the outcome of adopting a model that was only designed to benefit the few has ultimately been growing inequality in our country, and the absurd and senseless exploitation of the workforce.

When it is said that wages in Mexico cannot be increased on a discretionary basis, or as the result of an urgent national programme to reduce poverty and stimulate consumption, we fall into a pattern which is not only unjust, but flawed. More so if such elitist, corporate proposals are backed by the authorities and, worse still, by trade union leaders who have no genuine concern for the wellbeing of the people they represent, even going as far as to sign an inexplicable Joint Statement of the Worker, Employer and Federal Government Sectors against pay rises, on 12th August 2014.

It is absurd to uphold a pay policy that has been failing for more than 30 years, a policy which is short-sighted and motivated by excessive greed for power and wealth, and which places the entire burden of responsibility and negative consequences onto the shoulders of workers, who generate the most wealth, but have the least. This selfish, limited and ignorant standpoint simply repeats what has not worked in the past, yet has increasingly led to capital accumulating in fewer and fewer hands. For the great majority, the counterpart to this has been dramatic growth in poverty and destitution.

This cannot stand, and no doubt the government is troubled by my proposal for establishing a new model that I have termed Shared Prosperity, which represents an entirely different and contrasting focus from the current system of growing exploitation and marginalization. This is also why some members of the government want to link salary increases to the country’s productivity, employment and economic growth. That is not the way to redistribute wealth under the prevailing model, but rather to concentrate it into the hands of ever fewer groups or families.

On the contrary, promoting consumption, demand and market growth and therefore investment, which in turn generates new kinds of work, is achieved through a policy of real jobs promotion – and there are many mechanisms for stimulating this – and with a clear and committed strategy for improving pay. The lowest incomes hold up the process and produce, as well as significant injustices, stagnation, recession and the subsequent delay of any program of economic development.

There are many clear examples of this. Mexico currently has the lowest minimum wage in Latin America and probably the world, according to official figures released by the ECLA (Economic Commission for Latin America) and the ILO (International Labour Organisation). Lower even than Haiti and Honduras, where salaries are 56 per cent higher than in Mexico. Not to mention the comparison with China, where barely ten years ago wages were half those in Mexico, but today are two or three times higher.

The statistics don’t end there: the average minimum wage in Canada is $10 per hour, and $7.50 for each hour worked in the United States is. In Mexico, the average daily minimum wage is 65.50 pesos, equivalent to $5 dollars per day. We’re talking about a brutal difference in terms of full working days, whereby a Canadian worker earns at least 100 dollars, an American $75, and a Mexican just $5. How can a disparity as dramatic as 1,000 per cent be explained, when the standard of living in those countries is probably no greater than double or slightly more than the average in Mexico?

This is what we call exploitation, and a lack of care for or solidarity with the workers who generate the wealth, with Mexico and its people. In our country we have at least 7 million households on the minimum wage, which multiplied by five family members, means we’re seeing 35 million people carrying out the lowest level of work such as cleaning houses and buildings, security jobs in residential areas or cleaning car windscreens, among others.

Political or economic analysis demonstrates that this does not stack up, whether rationally, or in human terms. Rather, it is clearly the product of an unjust and flawed model which has created greater inequality and extreme poverty, along with growing rates of malnutrition, disease, child mortality, premature death, frustration and resentment among the most affected members of society, which is the great majority.

How is it possible for a person faced with those conditions to have a fair and dignified pension, if the extra low minimum wage contributes 6.5 per cent of the retirement fund paid in by companies, the government and workers themselves? It will take around 30 years for employees to build up a larger pension than the one they currently have, once the minimum wage has increased. But as the great English economist John Maynard Keynes once said, in the long run, we are all dead.

A wage policy based on deprivation could have serious consequences for social stability, growth and peace. The low salaries paid in Mexico can be seen as a deliberate policy of exploitation and dispossession that has allowed a small group of more than 100 families to amass the greatest income, set against a population of more than 70 million poor people.

In Uruguay, Brazil and Argentina, pay rises led to an average increase of 20 per cent across all employment and 50 per cent in formal employment, precisely because of tax and financial schemes and stimulus for investment, whereby the state grants financial breaks to reward each new job created and the resulting wage increase. Furthermore, increases in productivity in these countries have been linked more to the value of labour, rather than to technology, machinery, equipment, infrastructure or capital investment.

Lastly, Mexico should observe, study and adopt measures from countries with successful growth policies, as opposed to obsolete and flawed models that only breed more poverty and marginalization. The Scandinavian nations of Denmark, Norway, Sweden and Finland have experienced significant advances in the accumulation of social capital, with efficient and egalitarian strategies that recognise the contribution of people and their intrinsic value to the productive process, and this has had an effect on dignified and fair pension funds. Norway is a country with a population of 5 million people and one of the largest pension funds in the world, worth around $850 billion. It’s about time corporate business owners, civil servants, politicians and trade union leaders looked to those countries and went on to speak and act with greater honesty and humility.

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