By David J. Lynch, USA TODAY
Of all the ways to curb unauthorized human traffic across the USA's southern border, there's one remedy that few people are even discussing: creating more jobs in Mexico.
The Mexican economy in 2006 is expected to post its third-consecutive year of better than 3% growth, but the jobs picture isn't as bright. Each year, about 1 million Mexicans enter the labor pool. But the economy creates only a sliver of the new jobs needed for them.
It doesn't require a degree in economics to understand that if there were more well-paid jobs in Mexico, fewer Mexicans would enter the USA in search of work. Today, more than half of the roughly 500,000 unauthorized immigrants entering the USA each year are from Mexico, according to the Pew Hispanic Center.
So why doesn't the Mexican economy — more than a decade after a landmark free trade deal with the United States — produce more jobs? "Although Mexico has done all the right things at the macroeconomic level ... and has integrated with the U.S., it has not done the last fundamental reforms," says Claudio Loser, a former International Monetary Fund (IMF) official.
Despite dropping trade barriers and liberalizing its financial markets, Mexico remains economically stuck. The consensus view is that to produce an adequate number of jobs, the USA's southern neighbor requires far-reaching reforms of labor markets, investment policy, the tax code, competitiveness — almost every critical component of a world-class economy.
Daunting challenges face economy
Mexico faces a daunting "to-do" list, but it's hardly mission impossible. Over the past generation, other countries in Latin America and elsewhere have pulled themselves from poverty to prosperity. From 1980 to 2004, both South Korea and Ireland roughly tripled per-capita incomes while Mexico saw little more than a 10% jump.
Today, just 12.8 million of the country's 43 million working-age population have jobs in the formal sector, according to the IMF. (Millions more work in off-the-books jobs with low or uncertain wages and no benefits.)
Despite widespread acknowledgment of the need for an overhaul, Mexican politics are producing gridlock not change. In 2000, when Vicente Fox was elected president, ending the ruling Institutional Revolutionary Party's 71-year lock on power, there were hopes for ambitious reforms.
But political squabbling, as Mexico adjusted to the new multiparty reality, has stalled them. So cozy state monopolies retain control of vital sectors such as electricity and telecommunications. That keeps prices sky high, which saddles the entire economy with uncompetitive costs.
Ultimately, unless job-creating reforms are implemented, the enormous disparity in living standards on opposite sides of the border will continue to draw Mexican labor into the USA.
Today, the ratio between American and Mexican incomes is roughly 6-to-1. To curb illegal immigration, Mexico doesn't have to become as rich as the USA. It just needs to close the gap and give its citizens hope of further progress. After all, Connecticut's per-capita income is almost twice that of Mississippi's. Yet plenty of people live in the Magnolia State.
Mexico's predicament, however, is growing more urgent because of the rise of China. Since joining the World Trade Organization in 2001, the Asian power has emerged as the low-cost supplier in a host of industries from furniture to toys. Mexico, after years of operating as the low bidder, suddenly finds itself priced out of many markets.
Growing competition from China
The two developing nations compete head-on in about one-half of the goods — equal to three-quarters of their total export value — that each ships to the USA, the IMF says. Manufacturing costs are almost twice as high in Mexican clothing plants as in their Chinese rivals, according to the Inter-American Development Bank. In the three years ended in 2003, Mexican textile job losses totaled 187,000.
"Mexico is not well-positioned in the major dynamic markets," concludes the IMF.
During the NAFTA debate, Mexico's then-president Carlos Salinas said the trade deal would allow Mexico to export "tomatoes, not tomato pickers." Yet, more than a decade later, the tomato pickers keep coming.
By the end of this decade, demographics should cool the immigration controversy. Mexico had the world's highest fertility rate in the 1960s, when the typical woman had seven children. Now, the average is down to 2.6 children.
So the annual number of people turning 15 years old will drop from a peak of about 1 million in 2003 to about 600,000 by 2010, according to Philip Martin, a professor at the University of California, Davis.
"Demography is real. There will be less migration pressure from a rapidly growing Mexican labor force in the future," Martin says.
But unless Mexico musters the political will for comprehensive economic reforms, cross-border flows won't dry up entirely. What would be needed to really make a dent in illegal immigration?
"The economy would have to grow at double the rate it is today," Loser says.
"It may take a generation."