The visit of the Vice President of the United States to Mexico on June 8 served to address various issues on the bilateral agenda . The media gave importance especially to the migration issue, but Mrs. Harris gave a prominent place , also , to the labor question. Her appointments deserve some comments.

Saul Escobar Toledo

Canada, the third partner of the T-MEC had announced through its ambassador in Mexico, on June 2, that its government will allocate 27 million dollars for programs that allow changes in the labor practices , promote reform and its implementation. That is, he said, to support Mexican workers and the promotion of democratic unions.

US policy has not consisted only in words and money. For now, there are already two complaints for labor reasons that have been formally taken up by the Biden government at the highest level under the mechanism proposed by the T-MEC (USMCA). As the commercial representative, Katherine Tai , in charge of presenting the complaint said, now it is about “defending the workers at home and abroad.”

One of the complaints refers to a conflict in a company called “Tridomex”, an auto parts factory located in Matamoros (a city of the northern border), where, they claim , collective bargaining and free association were seriously affected . The investigation is ongoing and if it were found , indeed, there were these faults , it would have to be repaired or, where appropriate, apply sanctions on the company including additional tariffs or bans on its exports. It must be said that this company is a subsidiary of Cardone Industries , based in Philadelphia , dedicated to the manufacture of auto parts . This is a good example of a maquiladora, the type of sweatshop where for many years there have been systematic violations of labor rights and the absence of representative unions and legitimate collective contracts (supported by the workers) .

This was the second complaint in a month formally filed by US authorities . The first was against a General Motors plant , where more than six thousand people work, located in Silao, Guanajuato. They found, also, serious irregularities committed during a voting process arranged to find out if workers were supporting a contract negotiated by an old and corrupt union. The scandal even reached US Congress; a special commission demanded that the company should not meddle in union affairs.

The new trade policy of the US represents a major shift. During many decades Washington has defended its companies and investors at all costs, supporting repressive measures against workers, direct intervention of the CIA (Central of Intelligence Agency) , and even violence against governments that have tried to be, as Ms. Harris said, favorable to workers and their organizations . The US administration had never shown solidarity for unions and the defense of labor, more so, when workers struggle against the arbitrariness committed by the subsidiaries of the large manufacturing consortiums located outside its territory.

This major change is due to several reasons, including strong pressure from the unions. The vice president clearly alluded to this situation when she spoke with the Mexican labor activists . Apparently, a political gap has opened in that nation, in which either a government with a progressive and pro-labor line is imposed; or there is only the ultra – conservative option of the Republican right whose central figure continues to be Trump. An Obama- or Clinton-style centrism does not seem a good alternative right now.

However, it is not clear how far the new direction of the Biden administration will go. Within his own party there is resistance to some of the president’s proposed changes , such as tax reform. In the case of Mexico , we don´t know yet what the reaction of the companies will be, which, for now, have denied their responsibility in the violation of labor rights. Will the top managers of the companies accept to change their labor schemes and open negotiations with the workers on fair terms, as the vice president said , or will they continue to keep “business as usual” with various legal maneuvers? If sanctions were applied, would they rather decide to leave Mexico and go back to the US? Maybe this last option would be welcome and supported by the US government.

Despite these uncertainties, and the damage caused by the pandemic including a slow recovery of the Mexican economy, the new US trade policy opens an opportunity for Mexico to change its relations with its commercial partners. The so – called “comparative advantage”, based in very low wages and poor working conditions in Mexico, has played up to now an important factor to attract foreign investments. To change this scheme the government of Lopez Obrador must not only carry out enhanced surveillance of labor laws as their commercial partners are claiming and is part of USMCA. In the medium term, it would have to propose a new industrial policy that would make it possible to attract foreign investment, while increasing wages and contractual benefits. For this to happen, so foreign companies would not be tempted to withdraw from Mexican territory, the government would need to offer incentives based on a more modern infrastructure; a better qualification of the workforce ; and more resources for research and development of science and technology.

In the medium and long term, sustained improvement in wages of the Mexican working class would imply a new agreement with the United States and Canada. Much more ambitious than what was already agreed in the T-MEC or USMCA: a new scheme of development cooperation is needed. A new kind of relationship between companies of foreign capital and Mexican workers, based on better jobs, with the support of the governments of the three nations would be viable only if it rests on a sustained increase of productivity . And the latter would require a relevant hike in investment based on modern technologies and production processes .

A change of this magnitude would need time and a favorable political environment in the North American region. New winds are blowing , but it is not clear if they will go far enough.

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By Saul Escobar Toledo
MEXICO CITY, Mar 26 2021 (IPS)

A compilation of testimonies collected by Blanca Velázquez Díaz and published by the Ebert Foundation (available at: http://library.fes.de/pdf-files/bueros/mexiko/17328.pdf) offers an account of the harsh reality by which some workers of the maquila industry in the Mexican state of Morelos have gone through over these last twelve months. Their words reflect, undoubtedly, similar experiences of millions of workers in different parts of the country.

Saul Escobar Toledo

Their working conditions were already very unfavorable: in the textile sector and specifically in the branch of clothing and footwear, working days exceed eight hours a day, time in which they are permanently seated in non-designed chairs ergonomically, supporting extremely high temperatures in closed places with little ventilation.

The spread of COVID-19 made matters worse. Mainly, the bosses of the maquilas in Morelos did not respect the official recommendations and opted for the dismissal of their employees or cut half of the wages they received weekly.

For example, a worker identified as Lili said, “The company is paying me 280 pesos (14 dollars) a week …” while another, Anita says, “I am now working cleaning houses, the truth is that $ 400 pesos (20 dollars) the factory is giving me now is not enough”. Other interviewees indicated that they have received half of their salary.

Vicky: “Getting only half the salary the situation is bad, what am I going to do with only $ 400 pesos a week? that’s tough for me, and the company has us on hold, no one knows when I will get back to work … ”

Some more, a little luckier, affirmed that “From April 3 they sent us to rest with a base salary, which is really very little, 833 pesos (41 dollars) a week …”

There were also cases in which the workers decided to stop working so as not to get infected, and were fired:

Brenda: “… the company chose me to continue working on contingency days, but I saw that several colleagues went home sick with symptoms of COVID-19 and that was why I decided not to expose myself to the Coronavirus, my supervisor was terribly angry with me for making that decision, but I was sure that what I had decided was the right thing to do, to stay home and protect myself. Now I am fired, I was no longer called. ”

Almost all confessed going through a very tense emotional situation:

Justina: “Well, personally in the mental sphere I want to take things easy, but it is a bit impossible when I watch television or social networks, since they are flooded with what is happening in the pandemic and with bad news. They have been very outrageous at the time of reporting, I think that’s why, so sometimes I can’t get to sleep … ”

Finally, the workers were questioned about government aid. All answered they did not receive any support from the federal, state, or municipal governments:

María: ” No, at least nothing to me, I only remember that once the assistant of the mayor of the municipality (Emiliano Zapata) was distributing pantries, but they had a cost …”

Vicky: “Oops! nothing, not a glass of water …! ”

Anita: “The truth is, nothing, at least not even a pantry has arrived here in my neighborhood. ”

The author of the compilation concludes that, according to the testimonies collected,

“The more important consequences (observed) were unjustified dismissals … during these months of health emergency. The major concern of workers is how to generate an income … since the current employment situation looks increasingly difficult. Their mental and emotional health is in constant tension…, especially due to the low economic resources to support their families; besides, they are fearful about the possible spread of COVID-19 when they must exit their homes and go to the streets looking for an (extra) income … Add to this situation the double and triple work burden. Home education of their minor sons and daughters is generating many more hours of work for them. The care, especially of children, continues to fall primarily on women, just because they are females, with multiple responsibilities and little or no help from their partners, a situation that has led to stress, worry, anxiety, and insecurity, to mention some consequences ”

Another important piece of information refers to the behavior of the unions. According to the testimonies collected, Blanca Velázquez assures that in normal times the unions do not defend their affiliates; neither they have done in times of pandemic since they abided unashamedly business decisions and left the worker abandoned to their fate.

Finally, the text calls our attention about the almost total absence of the Mexican State in this situation, particularly the federal government. Rightly concludes the author of this collection, that:

“The social programs that the federal government has promoted for particular sectors, especially vulnerable ones, should be expanded for the workers laid off or when the bosses did not comply with the full payment of wages. We believe that programs for people who were laid off should be promoted immediately or, failing that, (legislate) unemployment insurance to alleviate this serious situation and train those who require it to be able to be employed in other trades or professions”.

Millions of wage earners have been deprived of any help and it has had a high social cost and become an obstacle to economic recovery. It is difficult to understand the reasons that led the government to this oversight. Perhaps they expected companies would pay total wages or that layoffs could be resolved quickly. However, it was likely that they did not, as indeed happened, due to the behavior of many companies in the past decades, as they have constantly violated labor laws and promoted lack of representative trade unions, especially in industry of maquila.

The absence of a worker protection policy during the pandemic seems to be due rather to an economic project based on budget cuts and austere public spending that does not admit emergency measures. The testimonies collected in the book show the unfortunate effects of these decisions. Waiting for the US economy to be the main factor in the recovery may be successful in the coming months. However, it will not correct the damage done to working class families. Nor will boost employment if it is not accompanied by other measures, such as unemployment insurance and promotion of domestic production and consumption.

The words of grief and pain shown in this publication are a very expressive testimony of what the Government of the Republic could have done (as in other countries and even in Mexico City) but refused to do.

Saul Escobar Toledo, Economist, Professor at Department of Contemporary Studies in INAH (National Institute oh Anthropology and History, México) and President of the Board of the Institute of Workers Studies “Rafael Galvan”, a non-profit organization. His recent work : “Subcontracting: a study of change in labor relations” will be published soon by Friedrich Ebert Stiftung, Mexico City.
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Excerpt:

The trend of the Mexican economy during the last two years has not been positive. INEGI, the official bureau of statistics, has just reported that GDP registered a fall of 8.5 percent compared to 2019 with seasonally adjusted figures. But in 2019 GDP also receded, although in far less measure, less than one percentage point. However, it must be considered that the Mexican economy has been falling for 6 quarters (compared to the previous year). Considering the population growth rate (1.2 percent per year), the fall in the GDP per capita is close to 11 percent. This figure matters because it gives a more accurate idea of the size of the downturn. It is also necessary to take into account the two years, since our interest should be now to try to figure out how long the recession will be the endure, that is, when will Mexico reach the pre-pandemic level of GDP.

Saul Escobar Toledo

On the other hand, international trade has recovered. The drop was very severe in April 2020 (12 percent); however, considering the full year, there was a growth of 1.3% (according to the Netherlands Bureau for Economic Policy Analysis, available at cpb.nl). China was the one who made the big push for world trade, while in North America seems to have occurred a slower recovery.

Regarding investments and the flow of capitals, things do not paint very well, especially for developing countries like Mexico; the most worrying problem lies in the possibility of a financial crisis. The World Bank said in January that during 2020, the rate of public debt in relation to GDP in the emerging and developing economies, increased from 52 to almost 61%. It would be necessary to add the increase in private debt that multiplied by five between 2014 and 2019. A good part of these debts is external, that is, they were contracted in foreign currency. All this indicates that, unless relief measures are taken at the global level, this situation could become a serious problem due to possible moratoriums on payments. If that happens, it does not mind so much the level of indebtedness of this or that country as flight capital, devaluations and shortage of new funding would affect severely those countries which, like Mexico, require currency (dollars) to cover its imports, financial operations, and monetary reserves.

As for the internal factors, we have several problems to overcome. To better understand the matter, it is worth reviewing the different sectors of the economy.

First, the primary sector, grew during 2019 and 2020, particularly in the second half of last year. This indicates that we are far from a food crisis, which is of course good news. It is likely that, in addition, some import substitution took place. The problem is that this sector contributes little to the economy, just 3.5 percent.

On the other hand, secondary activities fell 1.7 percent in 2019 and 10 percent in 2020. The construction industry has declined for 6 quarters in a row. Manufacturing has had a shorter but more intense decline. This can be explained by global disruption, especially in the US economy, as well as the decline in final consumption in Mexico of some non-food products such as clothing and automobiles. A fall in manufacturing affects the wage bill in a special way, since the best average wages in the entire economy are paid in this sector: 1.5 times more than in the service sector.

Finally, tertiary activities (service) had a negative growth rate of 7.7 percent. It must be underlined that service brings 73 percent of employment and more than two thirds of the total product. Some branches of this sector, such as the cultural and sports leisure sectors, fell by 54 percent; and those for temporary accommodation and food and beverage preparation, 44 percent.

As the economy improves, it can be expected that some small companies could find the way out. But some other will probably not, especially those linked to tourism since this branch will take several years to recover. Worse, this branch delivered a lot of foreign currency to Mexico.

The effect of the T-MEC or USMC trade agreement could boost some branches of manufacturing, but here also there is margin for uncertainty due to the new terms of the treaty. In any case, many studies have shown that towing capacity of the manufactured exports for the whole economy is restricted. In this way, even if the situation could improve, it is not going to get us out of the crisis as quickly as we would like.

In short, the duration of the depressive cycle of the Mexican economy cannot be calculated accurately at this time. What can be said is that it will depend on a set of political decisions. Governments, mainly those of the more developed countries can help by facilitating the manufacture of vaccines and providing funds (in Special Drawing Rights, SDRs) so that multilateral institutions such as the IMF and the World Bank provide resources to alleviate the burden of debts and for health and development programs. So far, little has been done in this regard.

On the other hand, an agreement is required between the three countries of the T-MEC so that the labor and environment clauses do not become an adverse factor for growth. A program for development should include Central American countries and allow Mexico to evolve from a maquiladora country into and economic export economy of goods with higher technology and inputs purchased within the country; the outcome would offer better wages for Mexican workers.

Finally, the boost to domestic production is essential. The construction branch, mainly for infrastructure works, is a field of action that requires public and private financing, but the latter will hardly increase if government spending does not direct it with new projects and financing (in addition to those that already exist.). In the case of services, the rescue of micro and small enterprises is essential. Similarly, it will be necessary to recycle the labor force that worked in sectors such as tourism to be placed in other economic branches with better prospects, through qualification and training programs, preferably in local green projects (reforestation, clean energy, recycling of polluting materials, cleaning of rivers and open dumps, etc.). Additional cash transfer for people (especially women) affected by unemployment or under employment in the formal and informal economy would help fight poverty and raise consumption levels.

The political decisions listed (and others not mentioned) are going to be made, one way or another. Nothing will happen because of the natural laws of the market. Citizens claim will play a fundamental role in putting pressure on their governments and shortening the economic cycle. If those responsible for running the institutions do not respond, the years of economic hardship will be longer, as well as the size of the political and social crisis.

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The new year has arrived, but the situation is worse than in the last months of 2020. The pandemic is still unleashed: the end of the year holidays, the official permissiveness, and the slowness of the distribution of vaccines seem to announce that the disease will continue to wreak havoc for several months in most of the world, particularly in America, Europe, and parts of Asia like India. It has therefore been required to redouble preventive measures: a new lockdown and the disruption of almost all economic and school activities. Therefore, the recovery looks still uncertain and distant.

Saul Escobar Toledo

On the one hand, it will be necessary to substantially expand the funds earmarked for programs already launched last year to support the neediest individuals and companies. In addition, it is urgent to design new measures that can ensure a faster recovery and prevent new crises.

Among the latter, various institutions and specialists (e.g., the Nobel Prize Joseph Stiglitz), have pointed out how enormously helpful would be the issuance of at least 500 billion dollars of Special Drawing Rights (SDRs) by the IMF to launch an aid program for the poorest and developing countries. This program would not overwhelm the existing sovereign debts and would serve to finance the balance of payments and imports necessary for food, health, and improvement of the environment.

There can be no room for confusion. The recovery must be measured based on these indicators: reduction of sick people; increase in the number and quality of employment; and a greener production system.

Everything else, such as debt, parity of currencies, stock markets, the public deficits and even percentage points of GDP, should be understood as secondary issues or mere instruments to achieve the desired recovery.

Otherwise, there may be a simulated retorn to normality, apparently recovering what has been lost when in fact we will go backwards because there will be more poverty, inequality, pollution, and a decreased ability to prevent and face new catastrophes.

In the case of Mexico, the foregoing translates into the need to design a recovery program that does not exist today. The announced vaccination campaign is not enough if hospital capacity and first-rate health care are not improved. A new economy must lead us to the production of cleaner energy and other measures that reduce pollution and inject vitality into new economic branches. You cannot trust the United States–Mexico–Canada Agreement (USMCA) and infrastructure works in progress as the only drivers to recover the jobs lost. A new legislation on unemployment insurance, outsourcing, digital platforms, and programs to support families, especially those who live in the informal economy, is necessary. A progressive salary policy, like the one that has been implemented, is not enough if regional, gender and age gaps are not reduced.

To elaborate on the issue of employment, fundamental for a true recovery, we have consulted the report that the ILO and ECLAC published at the end of last year. The paper recognizes that the pandemic will “lead to the worst GDP contraction in the region’s history (a projected downturn of 9.1% in 2020), which has already had and will continue to have profound labor and social consequences” (available at https://www.cepal.org).

According to this study, the existence of a large informal sector, without access to social security and therefore very vulnerable, has had and will have a strong regressive impact on the income and quality of life of millions of people. Formal jobs were also affected as many people were laid off; others kept their jobs, but suffered a significant decrease in their income, due to the reduction of hours worked or to the fact that they were sent home with unpaid vacations or leave with lower wages. The effect of these measures was more severe in our country due to the absence of unemployment insurance.

A remarkable phenomenon that this crisis produced was the enormous number of people who were left without work and stopped looking for it. Technically they ceased to be part of the EAP (Economically Active Population) and joined the Economically Inactive Population (PEI). Women were particularly harmed due to their stronger presence in the sectors most heavily affected by the health crisis (domestic service, restaurants and hotels, commercial activities) but, also, to the prevalence of a macho culture that confined them to take care of the sick, children without school, the elderly and household chores.

The crises caused also that wage employment contracted less than own-account work. The reason is that the latter involve, for many of the activities, face-to-face contact, especially in the informal sector. In Mexico salaried workers fell by almost 14% in the second quarter of 2020 but self – employed accounted for a 30.9% drop. This decline has been reversed, but at the cost of a greater exposure of the informal workers to contagion, which would partly explain the growth in the number of sick and dead persons.

On the other hand, the study emphasizes the devastating consequences among young people: job losses affected them more than other workers. This situation, says the report, has been a factor that has accentuated “fatigue and loneliness… So, “feelings of sadness, fear and distress are also more common among young men and women.” The paper warns that: “the more time spent out of school and out of work, the greater the risks of precarious work and exclusion from the labor market throughout one’s working life”

To avoid these tragedies, programs aimed at improving their training are required; and maintain and improve income transfer policies for young people who study, the workers adults, and households. Otherwise, it is highly likely that young people will be pressured to look for an income mainly in the informal activities. It would also restrict the possibilities of investing in improving their labor capacities.

The latest data, offered by the Mexican government, show the slowness of the recovery: in November 2020, the employed population was 52.93% (in relation to the total of working age population), a little lower than in October and, of course in March (55.76%). Furthermore, most of the people who returned to work did so in informal activities. With respect to formal jobs, the loss in eleven months, from January to November, was 369, 890 posts. Nearly 278 thousand more were missed in December, as the president of the republic told in his morning press conference.

With this scenario, the recovery does not look so close or certain. The ECLAC-ILO study underlines that: “The health crisis has highlighted the importance of a solid and efficient public sector with the capacity to react quickly to shocks with strong economic and social impacts.” The situation that we are observing at the beginning of the year requires that the institutions of the Mexican state redouble their efforts, do it as soon as possible and with a comprehensive project.

Saul Escobar Toledo, Economist, Professor at Department of Contemporary Studies in INAH (National Institute oh Anthropology and History, México) and President of the Board of the Institute of Workers Studies “Rafael Galvan”, a non-profit organization. His recent work : “Subcontracting: a study of change in labor relations” will be published soon by Friedrich Ebert Stiftung, Mexico City.
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As many have observed worldwide, the outcome of the US presidential elections has been, as expected – full of hope and fear. Many people had the bad feeling that if Trump were to be re-elected, the uncertainty, already enormous due to the pandemic and its effects, would jeopardize the economic recovery worldwide. The triumph of Democrat Biden does not guarantee great solutions, but at the least offers a little more of transparency, certainty, and stability.

Saul Escobar Toledo

To understand the issue, it is worth remembering that to renegotiate NAFTA and the signature of the T-MEC or USMC (United States, Mexico, and Canada Agreement) anew labor chapter was introduced. It is Annex 23-A which is entitled “The representation of workers in collective bargaining in Mexico”. There is no doubt that this annex was agreed to try to prevent in Mexico the existence of “contratos de protección patronal” or protection labor contracts which favor employers as they are signed without the knowledge and of course the acceptance of the workers. In short, labor agreements are legally valid but fraudulent because there was no bargaining at all between employers and employees. This kind of contracts have made easier the permanent fall of wages of Mexican workers. The purpose for this has been to attract investments and companies from the US to Mexico.

As a result of the labor chapter agreed in USMC, Mexico had to reform its labor legislation, which happened in April 2019. The new administration headed by President Lopez Obrador was keen to these changes as he was convinced that companies have abused Mexican workers too much and too long.

The constitutional and law amendments gave light to a new labor model. The one that was in force for more than a hundred years was based on tripartite justice (government, employers, and workers); it is now supported by judicial courts. The old order gave the government the power to recognize and control the unions; the new is based on a broad freedom of association. For the first time in many years, Mexican workers will have a real chance to choose by secret, personal and direct vote their leaders and representatives; and join the organization of their choice.

Despite these reforms, the vote of the (new) Agreement in the Congress of the United States was a complicated matter. It was finally resolved when the bill HR- 5430 was adopted on January 3, 2020 by US lawmakers. In Title VII there is a “labor monitoring and enforcement “chapter. It includes an Interagency Labor Committee designed to monitor the implementation and maintenance of Mexico’s labor reform. The Committee will also have the task of establishing a web-based hotline, monitored by the Department of Labor, to receive confidential information regarding labor issues directly from Mexican workers.

The bill authorizes hiring of up to 5 additional full-time officers of the Department of Labor and assign them to the United States Embassy in Mexico. Their duty is: “Submitting to the Interagency Labor Committee on a quarterly basis, reports on the efforts undertaken by Mexicoto comply with its labor obligations”. The bill also established an ‘‘Independent Mexico Labor Expert Board’’, to be responsible for monitoring and evaluating the implementation of Mexico’s labor reform and compliance with its labor obligations. The Board will be composed of 12 members appointed by the government and both parties represented in Congress (Democrats and Republicans).

In summary, the Treaty contemplates a heavy bureaucratic apparatus that will monitor the conditions of Mexican workers , especially in industries such as: automobile assembly; auto part; aerospace; electronics; call centers ; mining and steel and aluminum. In case of finding violations and if they are not corrected, the goods produced in these companies would be detained at the border unable to enter the US and Canada, or rather receive a special tariff. This legal and institutional machinery is going to remain despite the political changes that take place in Washington due to the November 3 elections.

Meanwhile, in Mexico, things changed in more ways than one: the effects of the pandemic and the economic slowdown had a response from the government that consisted of maintaining its original program , planned since last year and, in addition , carrying out an adjustment to public spending . This austerity policy was confirmed in the draft budget sent to Congress for 2021.

Thus, the collapse of the employment, formal and informal, and the income of families have had no compensation, causing a huge social debt that is reflected in an increase of poverty and extreme poverty. It is also expected that the economic recovery will be much slower for the rest of the year and 2021. All this will undoubtedly make more difficult collective bargaining as companies will seek to cut staff, provide fewer benefits or freeze wages. In addition, while the health problem is resolved, the resumption of economic activities may cause more infections and deaths among industrial workers, as seems to be happening in the maquiladora industry along the northern border of the country.

Under these conditions, the implementation of the labor reform, with surveillance and in some cases direct inspection of US personnel could be the cause of disputes and controversies. Biden´s victory will probably put more pressure on Mexico. Labor unions in the US and Canada will support the “monitoring” is carried out effectively and on time.

The president and the Congress of Mexico cannot be indifferent and wait to see what happens. A decisive set of actions to curb poverty and unemployment, protect workers and revive the economy with lower risks is necessary and urgent. Only in this way can workers’ bargaining capacity be strengthened.

The future of the labor reform cannot depend on US pressure on Mexico. Even if we admit that the intentions are laudable,Mexican workers cannot become pieces of a mechanism at the service of a foreign country: nothing more and nothing less than the most powerful nation in the world.

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The national occupation and employment survey prepared by INEGI, with figures updated to July 2020, shows an improvement that has occurred in the last two months. However, the employment situation, compared with the data existing before the pandemic still shows serious problems:

Saul Escobar Toledo

INEGI registered an employed population of almost 50 million people (49.8) ; It should be noted, however, that the increase between June and July corresponded to the male gender, with an increase of 2.2 million people at the same time as there was a reduction of 750 thousand women .

Throughout these months, one of the sectors hardest hit has been that of the self – employed: 20% of them remained inactive in April; 16% in May; 10% in June and only 2% in July. Unpaid employees (which only receive tips or payments in kind) were also severely affected: 21% did not work in April, but in July were almost all toiling.

If we measure the phenomenon taking into account the informal workers ( who work on their own account or in the service of an employer), the figures are more dramatic: in April 10 million stopped working, in May 8, in June 5, in July still 3 million . If we accumulate all these figures, it gives us a total of 26 million, which would give an idea of the days / worker lost in recent months and the income that was not received. Some lost only a month, others two or three, and still in July many did not receive any income at all. The paralysis has affected mainly the female gender, but the number of victims is impressive.

Meanwhile, the rate of open unemployment was 5.4% in July, which yields a figure of 2.8 million persons. Here again, the rate is higher in women than in men (6.3% vs. 4.8%). By age, those most affected have been those between 24 and 44 years old, which represent more than 50% of the total. It must be emphasized that this rate has increased, not decreased, as it accounted for 4.7% in April.

Even more serious, the underemployment rate, although it fell in July compared to the previous month, is still 18.4%. This represents an increase of 3.21 times in April; 3.78 in May; 2.75 in June and 2.45 in July compared to the historical average prior to the pandemic. This means that new occupations have become more precarious, insecure s, worse paid and surely very poorly protected.

In short, we have several problems. The damage caused by economic paralysis and the pandemic : 1) affected formal workers who were laid off and have not found another job; or have not attended to their workplace and are living in uncertainty; or they have sought refuge in underemployment (and have lost income and benefits) . And 2) self – employed and informal workers who have had no income during several or all these months.

All this damage is a fact, has already happened but so far nothing has been done to restore it. As anyone can see, it is a large social debt. The repair of this immense gap in the economy of Mexican families cannot be solved with the social programs that were already planned. It is not possible to support an entire family with the elderly pension, or with student grants.

For example, the pension program for the elderly, which has the more substantial budget and covers a larger number of people. The amount of money delivered is not only insufficient today (around 600 dollars per older adult between January and June 2020, that is 100 dollars per month according to the Second Presidential Report).

Undoubtedly, the damage caused, the income that has not been replaced, will lead to an increase in poverty (between March and May the number of poor increased from 36 to 55% according to CONEVAL). The inequality also has increased. According to some studies, the wage bill suffered a drop of between 6.6 and 13.8% in the second quarter of the year calculated annually. This has resulted, naturally, in a reduction of consumption of around 20% (annually comparison, even with the rise in June and July).

A country with greater poverty and more inequality cannot be a desirable outcome for a government that has set out exactly the opposite. Above all, because in the face of these phenomena, the government has not proposed any special action.

On the other hand, the decrease in the family´s income points to a slower economic recovery due to the fall in purchasing power. The increase in minimum and contractual wages have not been able to remedy these losses and surely will not do so in the remainder of the year due to the magnitude of the economic slowdown.

The 2021 budget represents an opportunity to make up for something that Mexican families have lost; to prevent further impoverishment and to stimulate faster economic recovery. It has been argued, by the president of the republic, that a growth in government debt may be detrimental to an indeterminate tomorrow. However, the government do not want to recognize that the Mexican state has already contracted a huge debt with millions of families who have lost their income since March. Finding a formula to pay this social debt and at the same time avoid a financial crisis in the future is not impossible, nor is it a dead-end dilemma.

At the same time, the possibility of a progressive fiscal reform that serves to pay off this social debt and for a more vigorous economic reactivation cannot be ruled out for political reasons (the 2021 elections or the fear of a negative reaction from a privileged sector ) . The most surprising is that the government announced a reform of the pension system that precisely proposes an increase in employer contributions and requires increased public spending. This equates to an increase in taxes and an increase in the federal government debt. How, then, do you refuse to charge a greater tribute to the richest and most prosperous, and at the same time propose a scheme to favor big business (the companies that manage the pensions)?

A further reduction in public spending and investment (what they now call austerity) can only have the result that, once again, the cost of the crisis will be borne by the vast majority of the population. Its consequences would be equally negative for recovery of production, consumption, and prosperity of the country.

The government must face the most important question of all: give Mexicans the opportunity to overcome this crisis with the least possible losses. If they do not, all the architecture of the promised change will become fragile and maybe a mere rhetorical exercise.

A group composed by women and men, called Nuevo Curso de Desarrollo (New Course for Development) based at the National University of Mexico recently published a document to propose a set of measures to change the current economic policy in Mexico. This proposal responds to a diagnosis of the current situation: at this point of the year, the serious social damage inflicted by the health and economic crisis can already be observed. As we know, in Mexico as in many other countries, there was a great economic disruption caused by COVID. Millions of people ceased to receive income from their work. However, the Mexican government has not carried out sufficient support measures to compensate for these losses. The result is easy to guess: many households have been rapidly impoverished. It is estimated that between 10 and 16 million people in April earned much less to the point of not being able to acquire the basic food basket , a situation that has continued for many of them during May, June and July. And while it is true that more and more workers are returning to their jobs, the losses caused have not been repaired.

Saul Escobar Toledo

The paper recognizes the progress made before the health crisis: there was a significant increase in minimum and contractual wages; the right to a basic pension for the elderly was expanded; and support was extended to other vulnerable groups. But the situation changed dramatically, and yet the economic policy did not.

This situation – says this group – must be corrected. Therefore, an emergency strategy is urgently needed for the remainder of 2020 and for 2021. This new course could return some of what families have lost and, above all, make economic reactivation faster.

Since existing social programs are no longer sufficient, immediate action is required to protect formal workers who have become unemployed or underemployed, and informal workers who have not got no income at all.

The Group emphasizes that the reactivation of the economy cannot rest solely on the dynamics of the market. Both private consumption and investment will grow very slowly if there is no determined action from the state. That is, if there is no strong fiscal impulse. So, it is necessary, and it is now more urgent to launch a program to expand public spending. This means increasing the public deficit for 2020 and prepare a larger budget for 2021.

Financing of public expenditure can be covered by the flexible credit line of low cost available in the IMF and also by the Central Bank. Additionally, the banking system can cooperate with the recovery by granting more credit to companies and individuals and to support the government. Higher public spending should not necessarily become an unpayable debt and an unbearable burden for future generations.

In addition, it is required to carry out a set of legal reforms to implement unemployment insurance; a basic income for the poorest and most affected ; and the strengthening of development banks (strangely frozen today), as well as an industrial and regional policy that does not rely solely and passively on the supposed benefits of the trade agreement with the United States and Canada.

Additional borrowing should be seen as transitory and confined to overcome the emergency. Therefore, the document says, a tax reform cannot be postponed. A reform that lays the foundations for a new inclusive and sustainable economy. The undeniable political strength of the president of the republic, granted by elections that took place in 2018, must and can serve to achieve this agreement.

The government can presume that, despite the adversity, there is a balanced budget. But what good is that when inequality and poverty are exacerbated? The Mexican state and, first of all, the federal government have to recognize that there is a debt more important than the one recorded in public finances. And that is the income losses suffered by millions of Mexicans, losses that may last many months more.

If anything has been learned from the crises of capitalism in the last hundred years, it is that the laws of the market cannot be trusted. It is, then, time for politics, for decision-making, for a change of the economic course.

Note: The complete list of members of the Group and their publications are available at: http://www.nuevocursodedesarrollo.unam.mx

Saul Escobar Toledo, Economist, Professor at Department of Contemporary Studies in INAH (National Institute oh Anthropology and History, México) and President of the Board of the Institute of Workers Studies “Rafael Galvan”, a non-profit organization. His recent work : “Subcontracting: a study of change in labor relations” will be published soon by Friedrich Ebert Stiftung, Mexico City.