Experts See Little in Mexican Presidential Candidates’ Proposals to Solve Expanding Poverty

By Mark Browne | June 14, 2018 | 10:43 PM EDT

Left-wing candidate Andres Manuel Lopez Obrador is leading in the polls. (Screen capture: YouTube)

Mexico City (CNSNews.com) – Growing poverty affecting the lives of millions of Mexican citizens is unlikely to be solved by proposals offered by candidates running for president in the July 1 election, experts contend.

The leading candidate, leftist Andres Manuel Lopez Obrador, has promised to provide a monthly stipend to young university graduates who can’t find work.

A conservative rival, Ricardo Anaya, has proposed to raise the country’s minimum wage from $4.28 US to $9.15 per day.

But experts argue their ideas are unlikely to solve Mexico’s growing poverty because the proposals don’t address the country’s massive informal labor market where workers don’t have access to training, career advancement and benefits including government paid healthcare and social security.

“You have this huge portion of the economy that is informal, workers and small companies that operate outside the formal channels,” said Monica de Bolle of the Peterson Institute for International Economics.

Brazil has reduced the size of its informal labor force by half since the 1990s to 30 percent.

But some 60 percent of Mexico’s workers still work in the informal labor market, lacking the benefits of a formal job.

While Mexico has been successful at opening up its economy to free trade and foreign investment, its high poverty rates and informal labor sector make it a “laggard” in Latin America.

“To me, this is the issue to address in Mexico,” de Bolle said.

Millions of Mexicans have fallen into poverty in recent years, according to a report recently released by the government’s National Council for the Evaluation of Social Development Policy.

The number of Mexicans suffering “extreme poverty” decreased by 2.9 million, to 7.6 percent of the population between 2008 and 2016.

But the number in “moderate poverty” grew by 6.8 million, to 35.9 percent of the population.

As a result, overall poverty increased in Mexico by 3.9 million during the period, according to the report’s findings posted to the website of the Mexican Institute for Competitiveness (IMCO).

The relationship between informal work and poverty is very high, according to Juan Pablo Castañon Castañon, president of the business advocacy group Consejo Coordinador Empresarial.

States in Mexico with the largest percentage of informal employment suffer the highest poverty rates, he said at a press conference last month.

Mexico needs to create more formal employment and enact labor reforms that should include the removal of the 2 percent tax on formal employment salaries, he said.

Candidates in the presidential election have failed to put forward “serious” and “viable” proposals to solve the informal labor market problem, Castañon said.

IMCO analyst Ana Martinez Gutierrez, agreed, noting that the majority of anti-poverty proposals offered by the presidential candidates don’t address the link between poverty and the informal labor market.

Proposals offered by Lopez Obrador include providing a monthly stipend to 2.3 million young Mexicans between the ages of 20 and 25 who have graduated from university but can’t find work. The idea is to provide incentives that will make it less likely they could turn to criminal activity for an income.

Lopez Obrador has also proposed offering a monthly scholarship for students from poor families who stay in high school.

His ideas, however, are “similar to what we have seen in the past 20 years,” Martinez said. It would be difficult to cover the cost of the programs, she said, noting that “no one is proposing to increase taxes.”

Anaya of the conservative National Action Party (PAN) is running in an alliance with several leftist parties, and has proposed to make payments to families in extreme poverty as well as to raise the minimum wage.

José Antonio Meade, representing the ruling Institutional Revolutionary Party (PRI), would continue existing social assistance programs aimed at helping the elderly and poor families and children.

Martinez said the risk is that Mexico will continue with anti-poverty policies that aren’t solving the problem.

“The problem with poverty in Mexico is low salaries, so no matter what social programs you have, you still have to address the low wages. Social programs may not address this.”

Chiapas, Oaxaca, Veracruz, Guerrero, Puebla, Michoacán, and Tlaxcala are the poorest states in Mexico and have the highest number of informal laborers.

Martinez said the problem lies in the labor market. It is evident, she said, that Mexico isn’t going to be able to lower its poverty rate without creating better employment.

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