Union job killers
...this explains another reason why Mexicans have to come here to find jobs. As the post on Ohio and Texas demonstrates, the jobs are in states like Texas where employees have the right to work without joining the union and where taxes are low. If all of the jobs Ohio has lost were moved to Mexico, there would not be so many Mexicans wanting to move here to find work.The assault on Nafta is a signal that the Democratic Party thinks the U.S. should abandon its leadership role in pushing for modern, democratic capitalism in Latin America. But that's only the half of it. When Mrs. Clinton says she wants "core" labor standards shoved into the pact, it is code language for forcing on the U.S., by treaty, what the U.N.'s International Labor Organization calls "core principles." The U.S. has signed only two of the ILO's eight conventions precisely because the others would lead to labor-market rigidity à la Argentina. Big Labor bosses would love that but what about the rest of us? Probably not so much.
Canada got a mention Tuesday. But the whipping boy was Mexico, which stands accused of attracting firms by allowing worker exploitation. If an American lost a job in the past decade, the charge goes, it's because in Mexico business has no labor obligations. This claim is not only untrue, it is the opposite of reality. Mexico is home to militant, high-powered unions and the most burdensome labor regulation in North America.
Like Argentina, Mexico suffered the tragedy of repressive corporatism throughout most of the 20th century. A one-party system under the Institutional Revolutionary Party -- PRI -- ruled for more than 70 years, making sure there was no economic or political competition. But in the late 1980s and early 1990s a young, educated class of technocrats began to break the chains of protectionism, isolation and monopoly. Nafta, signed and ratified in 1993, was central to this. Its benefits include greater access to capital and trade for Mexico and also an increase in information flows, which are the source of innovation and progress in any country.
Nafta has done a lot for Mexico but there are some things it can't cure. Chief among these are the infirmities caused by too much labor-market regulation. Hiring, maintaining and firing a worker is so costly that employers go to great lengths to avoid taking on new employees. This produces an excess of workers relative to demand, depressing wages and benefits.
Yet it is not only high mandated costs that reduce opportunities. Employment in most cases requires union membership -- there is no such thing as a "right-to-work" state in Mexico -- and if a worker is expelled from the union, he loses his job. This gives union bosses extraordinary power, especially since there is no secret ballot in union elections. Promotions are based on seniority, not merit, so there is little incentive for workers to upgrade their skills or learn new technologies. This harms productivity and helps explain why Pemex, the oil monopoly with one of the country's most dominant unions, registered a net loss of $484 million last year, when oil prices were sky high. It's also one reason why the state-owned electricity monopoly known as CLFC is repeatedly unable to cover its costs with earnings and instead requires a federal subsidy every year.
Unions are powerful in another way too. They regularly launch pre-emptive strikes as a way to extract payments from business. Reforma newspaper commentator Sergio Sarmiento observed last week that in Los Cabos on the Baja Peninsula, the Revolutionary Confederation of Workers and Peasants is practicing what he calls "union blackmail" by blockading the Grand Mayan Hotel because the hotelier has contracted with a different labor union. The activists have "terrorized and attacked not only workers but also clients" and the action is "putting at risk $1.2 billion" of investment in the area.
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