Labor productivity in Mexico

A lot has been said about the need for a labor reform in Mexico to eliminate structural aspects that has a negative impact on the country’s competitiveness.

Undoubtedly, the legal frame has its effect on competitiveness, as the World Economic Forum’s Global Competitiveness Report 2010-2011 states (“Labor market: the worst weakness for Mexico in terms of productivity”, http://beammx.blogspot.com/2010/10/labor-market-worst-weakness-for-mexico.html).

However, labor market reality is a lot wider and more complex than that. For instance, a great driving force for the recent economic growth has been the manufacturing exports to the United States (automotive sector, fridges, telephone sets), that shows world class skills and expertise. Besides, an unfavorable reality as the low cost of labor, turns into a competitive advantage for attracting investments. According to ProMexico (government office dedicated to the commercial promotion and investment attraction), labor costs in Mexico and China are very similar since 2008 (due to a recent increase of salaries in China, and unfortunately a decrease in Mexico).

These are the advantages, but, which are the factors that reduce competitiveness?:

·         Low quality on education: Mexico is the worst OECD country according to the Program for International Student Assessment (PISA,2006), that evaluates 15-year-olds on 3 areas: science, reading and mathematics. Besides, on World Economic Forum’s Global Competitiveness Report 2010-2011, Mexico is ranked on number 120 out of 139 on quality of the educational system and 128 in the quality of math and science education.

·         Labor regulation: as I mentioned, it do is a factor that has a negative impact on the flexibility for hiring and firing practices, and flexibility for wage determination. There are no perspectives of a short-term reform.

·         Motivation: according to IMSS, at least 4.5 million workers between 20 and 40 years have some kind of depression, created by professional problems, and that reduces their productivity index in 40% (Published by CNN Expansión, September 17^th 2010).

We need to build and keep developing business around these constraints. Decide which actions are the best to improve productivity based on your organization’s particular circumstances and industry. One hint: just don’t manage based on best-sellers.