Economics: A lid remains on labor productivity
Labor productivity data for 2017 showed productivity only experienced tepid growth that was generally in line with the average 0.3% increase of the past 10 years. Despite the current administration’s stated commitment to stimulating labor productivity as one of the fundamental keys to economic expansion and development, it has largely failed to deliver on that promise.
Labor productivity has performed at disparate levels across sectors and regions, averaging close to 2% growth in both the primary and service sectors last year, but fell 3.0% in manufacturing.
Other labor market trends are also at work. The rise Mexico has achieved in formal sector employment during the past five years has been heavily weighted toward low-wage positions, and that expansion has not sufficed to significantly lower the informal sector’s percentage of the workforce.
Since 2013 the number of people employed in formal sector jobs has climbed an average 3.9%, a pace of growth that extended through the first quarter of 2018.
The lackluster increase in labor productivity over the past year is due in part to reduced capital formation and productive assets given the slowing of private investment in machinery and equipment, as well as in foreign direct investment, which will not revive until uncertainty is dispelled regarding Nafta renegotiations and the upcoming presidential elections. In addition to those factors, the significant contraction of physical public investment has had fundamental consequences in the form of depressed levels of infrastructure development, something that contributes directly to a decline in labor productivity.
Hopefully the next administration will apply specific measures to achieve a substantial rise in labor productivity, one of the main obstacles to Mexico's achieving sustained economic growth and overcoming persistent social deficiencies.
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