Mexico’s Gilded Economic Inequality

From the Spanish crown to the corrupt camarilla elite, Mexico’s leaders have long kept a strangle hold on middle-class growth in Mexico. It’s the stimulus in the Mexican negative feedback loop of political turmoil – widespread poverty in the 12^th world’s largest economy is the issue to end all other issues. Poverty fuels organized crime, and crime fuels corruption.  Yet despite vast economic growth per foreign trade, investment, and a series of new government programs – 43.6% of the country has been left behind to fair without education, access to healthcare, or the sufficient income to buy food. Upwards trending GDP has left GDP per capita trailing at staggeringly low rates for the past years – $19,500 in 2017 according to The World Factbook (just above China.) Productivity of the labor force is not to blame for the country’s destitute conditions, there is a government and education system suppressing the flourishment of the middle-class.

The Mexican government has forlorn its pact to Article 123 of its constitution. It states, “the minimum salaries should be sufficient to satisfy the normal necessities of the worker’s life, his education and honest pleasures, as head of a family.” Yet 43.6% of the country can not afford to put food on the table. Such is the case food basket cost $10.53 a day. Based on the $4.70 daily minimum wage, a worker could only afford 44.5% of the food group. This stagnant minimum wage (12 times lower than the U.S. daily ‘wage’ of $58.00) is not only suppressing basic human rights, but Mexicans’ purchasing power.

Mexico’s GDP is higher than Canada, Australia’s, and two places lower than the United Kingdom’s, yet the individual quality of life, and GDP per capita remains manifold times lower than all its successors at with $19,500 at the 89^th place. As an effect, a consumer driven economic boom has been halted. Subsequently, so has been progress and development. This dissonance is testament to the extreme wealth inequality of the country – the top 10% own 42.2% of the wealth, while the bottom 10% own 1.3%. It ranks 4^th with the most number of poor among richest economies. While GDP per-capita has grown 98.7%; over the last 20 years, there are still 3.5 million people in poverty for every millionaire.

Some might blame the labor force for these conditions, but statistics show this not to be true. Mexican workers worked a total of 2,255 hours in 2016 – the most of the 35 OECD members, compared to the 1,783 U.S. hours worked. Despite this, workers earned the lowest in the OECD rankings, on average $14,867, while U.S. workers earned $58,714. Mexicans are working longer hours than any other country a year yet earning the least. What can account for this unjust disparity?

Once the relationship with inflation and wages is analyzed, it’s evident that government monetary policies are to blame for conditions of poverty. The minimum wage lost 75% of its purchasing power in the past 30 years according to The Conversation. The nominal minimum wage has increased 12.8% but prices increased 26.9% due to inflation – lowering purchasing power by 11.11% in the last 3 years, according to Animal Politico. Mexico’s Central bank wants to keep the wage this way to prevent inflation at the expense of the average Mexican citizen. The Consejo Nacional de Evaluación de la Política Social, calculates that “for a daily minimum basket for two people to live on, the minimum wage would need to increase more than 145%,” to $8.75 a day. Mexico’s bottom 20% doesn’t make enough to eat three meals a day.

Poverty needs to be at the forefront of Mexican politicians’ agendas, overall GDP growth has only deepened the wealth gap and lined the top-earner’s pockets. This is because previous administrations have focused on private investment rather than poverty-combating programs. So much is evidenced by 2016’s lagging GDP per capita growth rate of 0.96%, compared to its respective 2.3% GDP growth. Despite anti-poverty efforts such as Prospera and a 16% increase between 1990 and 2012 in the budget of social programs poverty has been reduced by less than 2%. Under President Peña Nieto’s it fell by a measly 0.3% from 2012-2014, and “poverty rates have increased in many Mexican states.”

To combat this epidemic (and the domino effect it has with surging crime and corruption), Mexico should embrace leftist economic reforms. Doing so by gradually increasing the minimum wage $8.75 a day to combat inflationary effects and fuel a consumer-driven economic boost. The middle and working class do have the largest marginal propensity to consume. After all, private consumption accounts for “over two thirds of gross domestic product.”

A highly-skilled and educated majority class must be developed to eradicate mass poverty. Although the number of students enrolled in school has grown since the 1950s, 700,000 students dropped out in 2009, 7.9% of the population is illiterate, and “73% of households have a member with education below the 7^th grade.” Mexico must broaden it’s education efforts by investing a larger percent of their budget into the system.

Mexico was governed by a single party for 60 years, the entire country was organized to enrich those in power so it’s no surprise that widespread poverty is the natural outcome. The OECD even found Mexico was the most corrupt of all of its members. To move forward with policies helping the working class it must eradicate corruption and weed out bad politicians. To complete its transformation into a developed country it must liberalize individual economic freedom and increase access to educational opportunities. The government must be held accountable to Article 123.