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The unemployment rate in Mexico was reported to be at 4.8 percent in 2011. From the year 2000 to 2010, Mexico’s unemployment rate averaged 3.45 percent and even reached a historical high of 5.93 percent in May 2009. This paper will discuss the three main causes for Mexico’s unemployment from 2000-2010.
There were three main causes that were observed to causing unemployment in Mexico for the last decade. These include political & economic crisis, lower investments and a rapid population growth. However, accurate statistics of Mexico’s unemployment report are frequently questioned but the country’s, Mexico’s National Geography, Statistics and Information Institute (INEGI), uses the internationally accepted system to work out unemployment rates. According to the International Labour Organization (ILO), unemployed workers are those who are willing to work but have not secured employment for the past four weeks.
According to the INEGI, Mexico has an economically active population of 47.1 million people (as at second quarter of 2010) which was 1.4 million more than the previous year 2009. The figure represents the population of those who are over the age of 14 (at 562.9%). The increase in unemployment was partly due to increased population or for leaving employment for personal reasons.
The highest rates of unemployment are along Mexico’s northern border. The main reason for this is due to reduced investments by the United States because it is undergoing hard economic times. Workers had flocked to the northern parts of the country during the country’s boom times called the maquiladora program. During this period, firms were encouraged to set up their businesses in the northern states to take advantage of freedom to import raw materials and export finished goods but this has greatly reduced due to the economic hard times in the U.S. To stay afloat, many of these maquiladora companies laid off some of heir staff leading to higher rate of unemployment.
Effect of Population
It is a fact that every day the population of Mexico is increasing causing economic and social problems. The major effect of overpopulation in Mexico unemployment: when there are many people in a given geographical place the level of unemployment will increase. According to INEGI estimates, the current population in Mexico is 112 million people of which 57.5 million are of above the working age. Urban populations also increased along the border for the last decade during the maquiladora period. The economic incentives especially made to U.S. firms located in the border region between the two countries saw Mexico’s population plummet due to increased industrial developments. This was fuelled further after NAFTA that allowed more than 1,700 plants to operate in Mexico in the 1990s (The Effects of Overpopulation in Mexico).
Political and Economical Crisis
The government seems to have failed in its core regulatory framework. There is absence of basic agreements amongst Mexico’s political parties for the last 10 years now. This has led to serious backwardness in the country’s needed legislation in a number of crucial sectors. As a result, there have been structural reform failures on important sectors of the economy including labor, energy, fiscal and legal matters that could have seen a reduction of unemployment rates. Political crisis has seen Mexico slide to maybe 30 years when compared to its peers like Chile, Argentina, Brazil and Costa Rica, this is according to the World Bank.
To improve the prevailing unemployment rates in Mexico, the government needs to exchange its laws and regulations and adopt more efficient instruments with greater legal certainty while encouraging private investment. A stable government will see increased tax collection that will result to increased private and international investments in the country. Thus, business productivity will be stimulated needing training of more workers and creating more and beetter jobs (Rodriguez).
Considering the current standards regarding monopolies in the private and public sector, it is clear that the Mexican economy does not support new or unprivileged businesses. It is with interest that by law public monopolies and government owned companies control major sectors of the economy including oil, water and energy while private monopolies control the media, cement and telephones in the country. This does not auger well with new companies wanting to set foot in the country. This has resulted to minimal investments in the country. For these reasons, the government needs to encourage foreign investments by placing clear principles of competitiveness that will offer much needed incentives to both national and foreign private investments that are needed to create jobs (Rodriguez).
The above situation is further aggravated by the hard economic situation in the U.S. which has been the main investor in Mexico. As a result, the U.S. has been shunning investing in its neighboring country leading to for some time now. According to a Reuters report, the unemployment rate also rose due to the crippling recession due to a drop in demand of cars, television sets and other goods manufactured in Mexico as a result of the hard economic times (Reuters).
The unemployment rate in Mexico has been hovering around 3.45 percent between 2000 and 2010. The main causes of unemployment in Mexico have been identified as political crisis which has persisted for a decade now resulting to failure by government to legislate laws that will see improved economic status, a rapid population growth that has eroded or reduced the number of available jobs in the market and lower investments in the country due to stringent monopolistic laws that do not support new investments both by foreigners and locals giving an edge to already established firms. The government needs to stabilize such that it can legislate on the other two causes of unemployment and thus reduce unemployment in general.
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