César Maillard Canudas, Managing Partner, Maillard, Cerbón, Canudas, Argumedo, Palma y Asociados: Viewpoint

Viewpoint: César Maillard Canudas

With macroeconomic uncertainty at the start of 2017, the year is set to be a challenging one for the labour market in Mexico. In Latin America we have observed that all structural changes, no matter how simple they are, have brought about contradictory repercussions. For instance, while the economy continues growing, the population has had to bear the brunt of higher inflation and has experienced continuing high levels of poverty.

However, on the back of a labour reform process that began in 2012 and a maturing employment market, Mexico should continue on its current path by implementing a series of changes that demonstrate to foreign investors the strength and durability of its labour regulations. To bring it up to international standards it must examine other markets’ regulatory qualities to help build upon what has been done over the last few years. In order to achieve greater productivity and competitiveness, outsourcing must be examined to look at the possibility of profit sharing with foreign companies.

Furthermore, on a macro level the professional development of workers must be prioritised, in order to make them more productive and increase the country’s economic competitiveness. We must foster supply chains and help small and medium-sized enterprises (SMEs) create new and more advanced positions for staff. Some countries, such as France, have made an effort to encourage the use of technology in SMEs, in tandem with the professional development of workers, as a priority over any increase in salaries.

With the start of the labour reform process of 2012, we are obliged to create a Federal Labour Law that takes into account the current political and economic situation. Any new labour reform – combined with the ratification of the International Labour Organisation Convention 98 by the Mexican Senate – would undoubtedly lead to more union-related activity, as the combination of any such laws would introduce a collective bargaining agreement for Mexican workers. In addition, the cost of maternity leave must be shared by the government, employees and employers, without a social burden applied only on the latter.

Another topic that is especially crucial for low earners who are economically vulnerable is that lost wages and unemployment insurance must be included within the 3% average payroll tax. A big leap forward for this segment of the population was the Federal Minimum Wages Commission, which made the historic decision in early 2017 to de-index the minimum wage and raise the daily amount from MXN73.04 ($4.40) to MXN80.04 ($4.82), a day from January 1, 2017.

For these low earners on the margins of formality, regulations and inspections must be more flexible to encourage, not punish, workers and employers. This in turn should incentivise more formal employment over the long term. The flexibility of regulation should also apply to start-up companies and spin-off companies that are forging new, atypical business models.

In wider terms, the government should make allowances and develop regulation for institutions and employees focused on innovation. Despite Mexico technically being a developing country, there are strong foundations for research and development and a drive to create specific jobs related to innovation and in collaboration with academia.

As economies such as Mexico grow and mature there is an increasing possibility for many manual labour tasks to be automated or substituted by robots, which some see as a threat to many professions. What is important is that we have not arrived too late to adapt to this fourth industrial revolution, so we can ensure that humans and new technology – such as robots – can be complementary. This in turn can allow people to develop new skills which will ultimately make Mexico a more competitive economy within global value chains. Encouraging and nurturing labour in research- and innovation-led organisations is thus key, not only to the future development of Mexico, but also to the social and intellectual development of each individual worker.

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The Report: Mexico 2017

Legal Framework chapter from The Report: Mexico 2017

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