- The Washington Times - Thursday, May 4, 2006

Mexico’s economy this year is growing at its fastest clip since 2000, but new job creation is lagging while many workers are underemployed and earn only a fraction of what they can make in the United States. The limited opportunities and disparity in wages create strong incentives, even for people with jobs, to migrate north.

“The biggest thing is extremely low wages. Most workers who migrate to the U.S., it’s not that they can’t find a job, it’s that the job pays so much less,” said Jonathan Heath, chief economist at HSBC Mexico in Mexico City.

The median wage in Mexico is a little under $2 an hour, while a foreign-born Mexican worker in the United States earns $9 to $10 an hour, said Rakesh Kochhar, associate director for research at the Pew Hispanic Center.

“The wage gap is most likely the main motivation for coming here,” said Mr. Kochhar, who in a 2005 survey found that most Mexican migrants held jobs at home before heading to the United States.

The picture is unlikely to change any time soon, despite healthy economic growth in Latin America’s second-largest nation.

Mexico’s Finance Ministry this week said the economy probably grew more than 5 percent during the first quarter of the year. The country’s central bank last week said first-quarter economic growth was 5.2 percent, although the government’s official statistics agency is not scheduled to report first-quarter growth until May 17.

“The economy is doing well — much better than in previous years,” Mr. Heath said.

Mexico’s economy is closely tied to its biggest customer for manufactured goods, the United States. A 2001 recession in the United States dampened demand for Mexican exports, dragged down Mexico’s growth rates and stifled job creation.

The country recovered slowly, with economic growth hitting 4.2 percent in 2004 and sliding to about 3 percent last year.

The auto industry in Mexico — U.S., German and Japanese automakers manufacture cars and parts there — has helped lead the country’s economic resurgence. The growth is partly because of rising demand but also because production continues to shift from the United States to Mexico.

Consumer spending also has shown steady growth, offering another boost.

“But with all of the good news on the real economy front, there is one missing piece: formal job creation,” Luis Arcentales, a vice president with Morgan Stanley, said this week in a research report.

Many new jobs are only temporary or are informal positions such as street vendors, Mr. Arcentales said. Meanwhile, Mexico’s labor force is growing faster than the economy is creating formal jobs.

Mr. Arcentales blamed foreign competition — especially pressure from China — and a rigid labor market — including high severance and hiring costs — for dampening the labor market.

“While the economy has rebounded and is producing some of the strongest growth in more than six years, the quality of the growth on the jobs front still leaves much to be desired,” he said.

Mexico’s official unemployment rate, 3.4 percent for March, is not comparable with the U.S. figure because Mexico counts as employed those who subsist with unstable or marginal jobs.

Mr. Heath estimates that as many as one-third of the country’s working-age adults can’t find work, can’t find enough work or can’t find work in the formal economy with some benefits and stability.



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