The Decoupling of Productivity and Compensation in the Mexican Auto Industry: CSR Vs. the Moral Economy of Inequality.

In the last few years Mexico has turned into one of the hottest spots of the auto industry (AI) worldwide. In 2015 auto output reached 3.4 million units, 76 percent up from 2001, and the country become the larger producer in Latin America, the seventh producer and the fourth exporter worldwide, as well as the second exporter in the American market.  Provided that production has been increasing at a 9% rate in the last few years  (Covarrubias, 2014), at this pace at the end of the decade the country could well reach the frontier of 5 million units, quickly approaching on third of NAFTA output. As a result the AI is contributing a growing proportion of manufacturing wealth and employment –i.e., 22 percent and 20 percent, respectively—and becoming a key engine of the economy as a whole. The AI employs more than 700,000 workers, 70,000 of which are in the terminal sector.

            The neoliberal economic policy embraced by the Mexican government postulates that in order for workers to improve their income, it only takes let investment and employment freely flowing. Has this economic premise hold true for Mexican autoworkers? The answer is negative. The labor costs of the Mexican AI are not only the lowest worldwide but it has been descending. Mexican wages are the lowest among the twenty countries that account for most of auto production and consumption globally. In Stanford’s (2010) study on the geography of auto-globalization, out of 18 largest AI countries Mexico is the country with the lowest labor cost at a $3.95 per hour pay for wage workers. By 2007 the average wage was $3.95. Based on the analysis of collective bargaining agreements of the extant nineteen auto facilities by 2015, I estimate a $2.9 per hour average pay for blue collars, a 27% down from the former year. Such descending of workers’ compensation is taking place as labor productivity has been augmenting year by year; I estimate that labor productivity has increased by 176% between 2007 and 2014. That is, a 9 % annual average rate. It implies that there is a growing gap between wages and productivity in the AI.

            In brief, in Mexico there is a striking decoupling between the productive evolution of the AI and workers compensation.  How can we account for such dissociation? To answer this question is the objective of this paper. I contend that this decoupling has been possible because auto firms take advantage of the moral economy of inequality pervading Mexico. That is, the shared moral notions and beliefs about inequality that prevail in people’s thinking and lend consent to the widespread economic disparities and the growing gap between poor and rich in the country (Sachweh, 2012; Thompson, 1991; Hochschild, 1979).

            The study is primarily backed by case studies of four auto corporations (I.e., BMW, AUDI, Ford and Honda) carried out over the last two years including in site interviews with management and labor representatives. Methodologically it develops a comparative perspective in which I confront the Corporate Social Responsibility (CSR) guidelines of each firm against the labor and wage relations they have set up in its operations in Mexico. Taking into account that these are firms coming from different national contexts and getting into Mexico over different time periods  --i.e., Ford arrived during the 1960’s, Honda during the 1980’s and BMW and AUDI during the present decade--, the study account for –and control by—the influence of firm’s different institutional contexts and years of operations over the labor policies of their subsidiaries.

            The analysis of the moral economy of inequality (MEI) implanted in Mexican’s mental repertories is based on data from the World Values Survey and the Latinobarometro. Yet the main argument in this respect is that Mexico’s MEI originates from the nature of the institutions of labor that allow state intervention and management policies to circumvent the law.