Mexico Reforms its Labor Laws

The Senate in Mexico has finally approved a new set of labor law reforms that will be signed into law within a week.  This is big news and the first real reform in 40 years.

First, let's explain what it did not provide.  It did not deregulate unions.  The mafia-like hold that unions have on their workers and small business is still alive. Nothing in the new law forces unions to open their financial books and nothing allows companies to truly avoid the harassment that unions can place on a workplace. Organized labor is still very powerful in Mexico.

However, the new law is very exciting for economic growth and new business development and employment in Mexico. For example, the new law makes it legal to pay employees by the hour and to hire employees on a temporary basis or a trial basis and report all the wages legally so that employees can have social benefits.
For example, companies like Unosquare can now build temporary project teams or bring in hourly workers on a trial basis if needed. In the higher paid, knowledge worker class, this will make employees prove their skills and show their value in a way that is lower risk for companies. That will create more jobs and economic health. It encourages risk taking which is fundamental to economic growth.

Some experts believe this will add 1 - 2% economic growth which will take Mexico to a 5% or more growth rate. Something that hasn't happened in a century.  It also helps Mexico avoid the nightmare going on in Europe right now where companies cannot hire employees because they cannot legally fire those employees without paying a large sum of money. That is one of the biggest problems with European economic growth. That was a big problem in Mexico. Companies were not taking risk.  Now that will change.

The media, like USA Today, is reporting this as mostly positive, even though some on the left want to protect unions and their power to protect employees. The reality is that only the unions and the leaders of the unions are protected. More than 30% of the Mexican labor force works in the informal economy, meaning they still work without social benefits for housing and social security.  Now, informal, part time, or temporary workers can have social benefits provided and companies will take more risk and hire more workers.

This will further align Mexico with the United States and Canada as a powerful economic region that will effectively compete against China, India, and Europe. Great job Mexico!