Global Policy Forum

By David Bacon

For decades, US workers have been told their wages were too high -- that higher labor costs would force their employers to move to Mexico. Now Mexican workers, whose numbers on the border have mushroomed in the last three decades, are on the receiving end of the same threat. This time the bogeyman is China.

Beginning with the Asia Pacific Economic Conference, hosted by Mexico in Cabo San Lucas in November, a rising media chorus in both Mexico and the US has argued that Mexico is losing a low-wage competition with China. Plants have closed and moved as a result, the argument goes.

"With the advances of the giant Asian power," says Rolando Gonzalez Barron, national president of the Maquila Export Industry Association, "all these companies are trying to compete with China with cheap labor." He advises factory owners to move to southern Mexico, where wages are much lower. "The border has no possibility of competing with China."

There is no doubt about the extent of the sharp economic crisis now affecting border plants. Gonzalez announced last April that 300,000 workers had been laid off on the border in 2001 and the first months of 2002. Marco Antonio Tomas of Mexico City's Center for Labor Research (CILAS) puts the current number laid off at 400,000. Until the crisis hit, the maquiladora industry, almost all in north Mexico, employed over 1,300,000 workers, according to the association.

Only two actual plant closures have been cited as evidence, however. One, a factory making computer monitors for Phillips North America in Juarez, shut over the summer, costing about 600 jobs. Production moved to Suzhou, China. Phillips, however, has another twelve border plants, and increased investment in many of them last year. In another case, Canon closed an older facility making inkjet printers, moving production to southeast Asia.

While some media estimates repeat employer assertions that maquiladora workers earn as much as $2.00-$2.50 per hour, and compare this to 35¢/hour in China, the actual average maquiladora wage is generally about $6-8 per day. Meanwhile, a study by the Economics Faculty of the National Autonomous University in Mexico City says Mexican wages have lost 81% of their buying power. Twenty years ago, it says, the minimum wage could pay for 93.5% of a family's basic necessities, while today it only buys 19.3%.

Another study cosponsored by the Coalition for Justice in the Maquiladoras and the Interfaith Center for Corporate Responsibility found that at the minimum wage, it took a maquiladora worker in Ciudad Juarez almost an hour to earn enough money to buy a kilo (2.2 pounds) of rice, and a worker in Tijuana an hour and a half. By comparison, a dockworker driving a container crane in the Los Angeles harbor can buy the rice after 3 minutes at work, and even an undocumented worker at minimum wage in LA only has to labor 12 minutes for it.

Nevertheless, maquiladora workers say they get the message.

Nelly Benitez, who worked until recently at one of Sony's three huge plants in Nuevo Laredo, says the company openly threatened to move to China if workers didn't accept cuts in wages and benefits. "The company began threatening to move to China when they began lowering the wages and benefits in 2001," she recalls. "Weekly salaries were reduced from about 800 pesos to 600 pesos [for a six-day week]. We used to get a ride to and from work on company busses, since almost no one owns a car, and often we get off work late at night. Now we can only get a ride one way, not both."

Benitez says that Sony is still bringing new machines into the plant to make batteries and microcassettes. But after starting production, the number of people working each machine is then cut. "For example, if they start with five, they'll eventually fire three, and the other two have to continue running it."

Sony has also transformed its workforce. Until the recession hit, each of its four plants employed about 2,600 people, who were permanent company employees. Now, say Benitez and Tomas, the number has been reduced to 1500 apiece. The majority are temporary hires, laid off right before they acquire permanent status under Mexican law, at the end of 90 days. "They never became permanent employees," Benitez says, and therefore have no right to severance pay, housing benefits, or status under labor law.

According to Martha Ojeda, director of the Coalition for Justice in the Maquiladoras, which encompasses organizations in the US, Mexico and Canada who assist maquiladora workers in organizing themselves, the China threat is being used far beyond the maquiladora industry. The World Bank and the administration of President Vicente Fox have proposed modifying Mexican labor law to eliminate many of its historic protections for workers. "They're promoting a policy of fear, in which workers are told that it's better to see five pesos in wages cut to three, than to lose their jobs entirely," Ojeda explains. "This is combined now with an effort to change the labor law itself. If we don't accept their reform, the companies say they'll take their investment elsewhere."

The reforms under discussion include the kinds of things happening in the Sony plant. "Companies want the unlimited ability to hire temporary workers, who never acquire seniority, benefits or labor rights," Ojeda adds. "This is what already exists in the maquiladoras. They're using the maquiladoras as the model for what they want to do with workers in the rest of the economy."

Rising anti-Chinese hysteria in the maquiladora industry, however, is obscuring a basic fact. The border industry has tied the Mexican economy so tightly to the US market that when consumers in the north stop buying, workers from Tijuana to Matamoros lose their jobs by the thousands. When the US economy catches a cold, the saying goes, Mexico comes down with pneumonia.

While the maquiladora industry would like workers to look east to China to find the source of their problems, and enter into a wage-cutting race to the bottom, "where we really need to look is north," Benitez concludes.

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