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Mexican Labor Victory

Silao is a city of 150,000 people on a dry semi-arid plane about 200 miles northwest of Mexico City. The sprawling state-of-the-art General Motors Assembly Plant on its outskirts builds the popular and highly profitable Chevrolet Silverado and GMC Sierra pickup trucks, 340,000 of which rolled off its assembly lines last year destined for buyers in the United States and Canada.

Workers in the Silao plant won a surprise victory there on February 2 against seemingly insurmountable odds. Seventy seven percent of 5,400 workers voting—6,500 work in the plant–chose an independent union rejecting a corrupt and compliant union entrenched since 1995. Workers clearly had enough of rock bottom wages and substandard working conditions.

Seventy seven percent of 5,400 workers voting—6,500 work in the plant–chose an independent union rejecting a corrupt and compliant union entrenched since 1995.

The victory is great news for Mexican workers but could prove to be very positive for U.S. and Canadian workers as well and sets the stage for building labor solidarity across borders. Mexican autoworkers—among the most productive in the world—could finally get a fairer share of what they produce and have a better life for their families and communities. And, U.S. workers could see less pressure on their wages and jobs.

The critical challenge is to insure victories such as Silao spread across the critical Mexican auto sector, which accounts for more than a third of the country’s goods exports to North America. Independent unions could redefine comparative advantage, basing it on factors such as innovation, quality, and productivity not suppressed wages.

Eric Welter in Flint, Michigan liked the Silao news. He is United Auto Workers (UAW) Local 598 shop chairman at Flint Assembly and told the Detroit Free Press, “[When Mexican] wages go up, that helps us…it makes us more competitive and helps us not to have to make future sacrifices.”

The Silao victory reflected courage and mobilization among plant workers and their allies. The leader of the independent union, Maria Alejandra Morales Reynoso, 32, had to confront threatening thugs coming to her home as did others. They stood tall.

International support was vital. U.S. and Canadian unions weighed in and Katherine Tai, the U.S. Trade Representative, filed a complaint under new labor provisions in the eighteen month old United States, Mexico, Canada Agreement (USMCA), NAFTA’s successor.

In highly integrated markets what happens to workers in Mexico impacts workers throughout North America. If Mexican wages are suppressed, workers in the U.S. feel the downward pressure. The mere threat of moving a factory to Mexico can extract concessions.

The issue isn’t producing things in Mexico or expanding trade—both can be good—but rather making intimidation the basis of comparative advantage. The result is high productivity poverty in Mexico and job loss in the U.S. and Canada. Families and communities suffer on all sides of the border.

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Silao workers have comparable productivity and quality to GM workers in Fort Wayne, Indiana and Oshawa, Ontario, which all assemble the same pickups. Yet, in Fort Wayne a senior worker earns $33 an hour compared to $25 a day in Silao.

GM made a record $10 billion in North American profits last year. It’s hot selling GMC Sierra pickups approach $80,000 yet a starting worker in Silao is paid $9 a day. That wage would not be enough to buy two Big Macs in Silao let alone much of anything else. There is something wrong with this picture.

The high wages and better conditions in the U.S. and Canada didn’t simply drop out of the sky. After World War II, the United Auto Workers (UAW) and other unions fought hard to insure workers received a fair share of the high productivity and soaring profitability of automakers and other industries.

The result was highly profitable companies and auto workers entering the middle class, blazing a trail for workers across the economy. Walter Reuther, the legendary president of the UAW, said these high wages created “high velocity purchasing power” fueling strong U.S. and Canadian economic growth for decades.

In contrast, corrupt and compliant unions in Mexico signed “protection agreements” that protect employers rather than workers but enrich compliant union leaders. Mexico’s Minister of Labor, Luisa Alcalde, said last year that 80 percent of Mexican collective bargaining contracts were protection agreements.

The USMCA was overwhelmingly passed in the U.S. Congress with the inclusion of stronger language protecting worker rights than NAFTA. While the Silao vote is inspiring, the overall implementation of labor reform in Mexico to date has been another story and calls into question whether the new language alone will be adequate.

Overall the labor results under the new trade pact have been far from stellar. Under new Mexican labor laws, all workers must vote on their existing contracts by 2024. About 3,000 contracts have been voted on to-date and only 25 sub-standard protection agreements have been defeated.

Having a fair vote in Silao required a Herculean effort by the Biden administration and members of the U.S. Congress—commendable to be sure—as well as the attention and support of the U.S. and Canadian labor unions from the shop floor to the highest levels.

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It is critical now for the Mexican government to provide the resources and the political will to speed labor reform and for the U.S. and Canada to use the provisions of USMCA to protect workers on both sides of the border.

The stellar victory in Silao needs to mark a new beginning in labor rights in Mexico, not simply its high water mark. A new beginning could lead to high productivity prosperity across the continent.

Harley Shaiken
The Berkeley Blog