Employment debate in the context of NAFTA September 217 1
Take-away points The employment debate in the context of NAFTA Unemployment is mostly a macroeconomic phenomenon; unemployment in the Midwest is often below the national average US FDI flows to Mexico are well below what it d be need to influence the loss of US manufacturing jobs Increasing Mexico s market penetration in the US is not correlated with US manufacturing jobs At national level By region By sector Mexican wages have grown in US dollar terms in the last 2 years Hourly compensation has grown in the three NAFTA countries US Multinationals in Mexico pay above average wages Mexican labor is a strong source of competitiveness in North America. NAFTA s long-term demographic profile, a significant source of global competitiveness 2
1976 1977 1978 1979 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 Unemployment in the US is mostly a business-cycle phenomenon Midwest region rates are often lower than national average Unemployment rate 1976-217, in percentage Recession National Midwest 14 NAFTA 12 1 8 6 4 2 Source: BLS 3
1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 US manufacturing is not negatively impacted by the share of Mexican exports in US total imports 11 15 1 95 9 85 8 75 7 Recession Manufacturing employment USA Mexico share's of US Imports NAFTA China WTO 15 14 13 12 11 1 9 8 7 65 6 Source: BLS, US Census Bureau, INEGI 4
US manufacturing jobs losses did not go to Mexico Change in manufacturing jobs, 1994-216 cumulative in thousands 3, 2, 1,965 1, -1, -2, -3, -4, -5, -6, -4,676 USA Mexico Source: STPS and BLS 5
Manufacturing jobs in US and Mexico move together Change in manufacturing jobs in thousands 5 Mexico USA -5-1, -1,5-2, Source: STPS and BLS 6
manufacturing jobs Mexico Manufacturing jobs in US and Mexico move together Change in manufacturing jobs in thousands 5 y =.3441x + 162.46 R² =.6527-1,8-1,6-1,4-1,2-1, -8-6 -4-2 2 4 manufacturing jobs USA -5 Source: STPS and BLS 7
US foreign direct investment flows in Mexico are not large enough to explain job losses in the US Change in manufacturing jobs in thousands 5 Net creation of Mexican jobs derived from US FDI Gross job losses in the US 21 211 212 213 214-5 -1, -1,5-2, The data for the series Net creation of Mexican jobs derived from US FDI are obtained from the information provided by U.S. multinational enterprises located in Mexico to the US government. Source: BLS and US Census Bureau 8
Jobs. Base 1 =28 Market share, in % Manufacturing jobs in Midwest grow with US imports and exports from and to Mexico 15 Jobs Mexico as market Mexico as supplier 2 Census Region Midwest 1 95 9 18 16 14 12 1 8 6 Illinois Indiana Michigan Ohio Wisconsin Iowa Kansas Minnesota Missouri Nebraska North Dakota South Dakota 85 4 2 8 28 29 21 211 212 213 214 215 216 Source: BLS, US Census Bureau 9
Jobs. Base 1 =28 Market share, in % Manufacturing jobs in Southern US states grow with US imports and exports from and to Mexico 15 1 95 9 85 8 Jobs Mexico as market Mexico as supplier 28 29 21 211 212 213 214 215 216 25 2 15 1 5 Census Region South Delaware District of Columbia Florida Georgia Maryland North Carolina South Carolina Virginia West Virginia Alabama Kentucky Mississippi Tennessee Arkansas Louisiana Oklahoma Texas Source: BLS, US Census Bureau 1
Jobs. Base 1 =28 Market share, in % Manufacturing jobs in Western US states grow with US imports and exports from and to Mexico 15 1 95 9 85 Jobs Mexico as market Mexico as supplier 14 12 1 8 6 4 2 Census Region West Arizona Colorado Idaho Montana Nevada New Mexico Utah Wyoming Alaska California Hawaii Oregon Washington 8 28 29 21 211 212 213 214 215 216 Source: BLS, US Census Bureau 11
Jobs. Base 1 =28 Market share, in % Manufacturing jobs in Rust Belt states grow with US imports and exports from and to Mexico 15 Jobs Mexico as market Mexico as supplier 25 Census division East North Central 1 95 2 15 Illinois Indiana Michigan Ohio Wisconsin 9 1 85 5 8 28 29 21 211 212 213 214 215 216 Source: BLS, US Census Bureau 12
1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Jobs. Base 1 =28 Market share, in % Manufacturing jobs in US textile products are lost as Mexico loses market share in US 12 1 8 6 4 2 Jobs Mexico as supplier Mexico as market 18 16 14 12 1 8 6 4 2 Source: Comtrade, INEGI and Bureau of Labor Statistics 13
1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Jobs. Base 1 =28 Market share, in % Manufacturing jobs in apparel are lost as Mexico loses market share in US 12 1 Jobs Mexico as supplier Mexico as market 35 3 8 6 4 2 25 2 15 1 5 Source: Comtrade, INEGI and Bureau of Labor Statistics 14
1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Jobs. Base 1 =28 Market share, in % Manufacturing jobs in in transportation equipment do not fall or even grow as US imports and exports to and from Mexico grow 12 Jobs Mexico as supplier Mexico as market 3 1 25 8 2 6 15 4 1 2 5 Source: Comtrade, INEGI and Bureau of Labor Statistics 15
Real wages have grown in Mexico even in dollar terms in the last 2 years Average annual wages in Mexico 216 constant prices at 216 USD PPPs 16,275 Growth 16,73 16,88 1996-216 = 28% 15,862 15,679 15,745 15,527 15,99 15,176 15,165 15,8 15,172 15,23 15,23 15,311 14,83 14,294 13,67 13,27 12,513 12,1 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: Based on OECD Stats 16
Real wages in Canada have grown in the last 2 years Average annual wages in Canada 216 constant prices at 216 USD PPPs 36,62 35,3 44,29 44,677 44,82 43,35 42,385 41,15 38,941 39,424 38,671 37,869 38,34 38,311 37,346 46,561 45,483 Growth 1996-216 = 37% 48,213 48,43 47,385 47,931 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: Based on OECD Stats 17
Real wages have grown in the US in the last 2 years Average annual wages in United States 216 constant prices at 216 USD PPPs 46,933 45,82 48,929 51,877 5,97 52,428 54,367 52,752 53,321 Growth 1996-216 = 31% 59,691 6,154 57,176 58,219 57,369 56,439 56,233 56,61 57,13 57,653 55,243 54,432 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: Based on OECD Stats 18
Hourly compensation has grown in the three NAFTA countries; US Multinationals in Mexico pay above average wages Hourly Compensation Costs in Manufacturing 214 US Dollars +19% 34.56 34.96 +6% 37.4 29. 4.74 +43% 6.76 7.8 Mexico Canada United States 1996 214 MNEs* 214 MNEs: Average Compensation of Employees in Activities of Majority-owned Foreign Affiliates of U.S. Multinational Enterprises in Manufacturing - Mexico Source: The Conference Board, International Labor Comparisons program 19
NAFTA s long-term demographic profile, a significant source of global competitiveness Population pyramids for 24, 5-year ranges, % of the population 1+ 9-94 8-84 7-74 6-64 5-54 4-44 3-34 2-24 1-14 -4 1+ 9-94 8-84 7-74 6-64 5-54 4-44 3-34 2-24 1-14 -4 1 8 6 4 2 2 4 6 8 1 Source: US Census Bureau NAFTA population China population Female Male Female Male 1 8 6 4 2 2 4 6 8 1 1+ 9-94 8-84 7-74 6-64 5-54 4-44 3-34 2-24 1-14 -4 1+ 9-94 8-84 7-74 6-64 5-54 4-44 3-34 2-24 1-14 -4 Japan population European Union population Female Male 1 8 6 4 2 2 4 6 8 1 Female Male 1 8 6 4 2 2 4 6 8 1 2
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