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Special 090406 MaquilaPortal

Monday, September 4, 2006


Mexican Social Inequalities and Unemployment


By Samuel Peña Guzman


Social inequalities in developing countries, like Mexico, seem so normal that few people pay attention to the figures that show the huge differences that exist.


Mexico, as a developing country, is no exception and an example will suffice. A few days ago I saw with interest a study done by the School of Graduates in Public Administration at the Tecnológico de Monterrey, or Monterrey Institute of Technology. The study analyzed the huge inequalities existing in Mexico. According to the report, the average income received by the population’s poorest 10 percent is under 2 percent, while the wealthiest 10 percent receives 40 percent of national income. Amazing, isn’t it?


These figures are significant by themselves and even imply several risks for our country. I think we should not be surprised by the fact that in the recent election more than 63 percent of the population either neglected to vote or did not vote for the winning candidate. However, considering the differences in income among the population, I think democratic governance is still possible in Mexico; and if we compare Mexico to other Latin American countries, the price being paid here for the transition among political parties or even, as some writers say, for a “democratic transition” – on which I do not necessarily agree – has been a rather low price.


In some other countries, social inequalities have appeared not only in demonstrations and hard struggles for power, but in coups d’état, civil wars, fraud, violence and total ungovernableness.


Thanks to God in Mexico we had not reached those extremes, even if social inequalities are similar to those in the countries where there have been violent demonstrations as mentioned above.


It is really amazing that in Mexico, one of the first 15 economies in the world, there is extreme poverty in around 18 million people according to the above-mentioned study. Even if poverty in rural areas has been reduced, poverty in urban zones stays the same, and even in some urban areas, mainly in the largest cities, the poverty index rises every year, therefore limiting regional economic development. In rural zones poverty has been reduced due to several factors, mainly migration to cities, or in some cases due to government programs to fight poverty and by remittances sent home by fellow countrymen living in the USA.


Cities like Mexico City, Guadalajara, Monterrey, and Tijuana, among others, have been the destination of a significant percentage of the population from rural zones who have immigrated to those cities looking for better opportunities, causing an increase in unemployment and limiting the economic development of some of these cities.


Insufficient creation of formal jobs, and also the persistent problem of poverty in urban zones, causes the pressing need to generate larger economic growth and a larger number of jobs. Therefore, it comes as no surprise that migration to the USA becomes a “relief valve” for Mexico, before the inability to generate employment and underemployment opportunities not only for the currently unemployed, but also for the population that year after year joins the labor market. Every year a labor lag is created and subsequently grows. It seems to be an everlasting problem, but such a huge problem that there must be several factors to at least ease the problem in the short-term, and with a sustainable development policy maybe defeat the problem in 15 or 20 years, if there are favorable and/or required conditions.


Among the several factors to be considered there is, of course, education. According to the study made by Tec de Monterrey, average education of the 10 percent poorest people in Mexico barely reaches 4 years in school, and for the highest 10 percent it is 12 years. The difference is very high. Unfortunately population with the lowest income is forced to work to survive and therefore drop out of school. In cases like Nuevo Leon, average education among the economically active population is 10.1 years, which is high when compared to other states in Mexico; however, Nuevo Leon still shares the problem of poverty with the rest of the country, even if at a lower degree.


There are many government programs with the final purpose is fighting poverty; however, we must invest more in human capital and therefore invest more in education than in government subsidies for current expenses.


The administration of Felipe Calderon, Mexico’s winning presidential candidate should make more emphasis on increasing the population’s human capital by focusing on raising education levels.


At the same time, generating new jobs will become essential for larger economic growth and to attenuate the growth of poverty, mainly in urban areas in Mexico.


I think social inequalities and unemployment in Mexico go hand in hand, both in causes and in effects. This task is not only the responsibility of the authorities, but also involves the private sector, in order to generate labor and economic opportunities for those who need it more; otherwise we will soon face the problems that have already been faced by many Latin American countries, the main characteristics of which have been violence and ungovernableness. Let’s hope we have “learned in somebody else’s head.”



Hector Samuel Peña LL.M, MPA, currently works as a Foreign Investment Coordinator for the State of Nuevo León.  Mr. Peña, who has a Master in Laws from American University and a Master in Public Administration from George Washington University, has advised foreign companies expanding operations into Mexico.  He can be reached via e-mail at samuel.pena@mexicoglobal.com


(Reprinted with authorization from Maquila Portal, a specialized web site for the maquiladora industry in Mexico.  Maquila Portal can be found at www.maquilaportal.com.)