In 1992, Ross Perot foretold of NAFTA causing a grand migration of jobs to Mexico to emit a “giant sucking sound.” I started Unionwear the month Perot made that famous prediction and spent the next few years second guessing my career choice.
Q. So why don’t I ever see apparel labelled “Made in Mexico?”
Step 1: The law of supply and demand met the law of unintended consequences
Legend has it that immediately after the passage of NAFTA, US agribusinesses began flooding the Mexican market with cheap corn and other farm products. This drove Mexican farmers out of business, and North in search of factory jobs faster than American maquiladoras could be deployed along the US-Mexico border. The supply of cheap labor outpaced the demand for it, and real wages began shrinking. Desperate, Mexicans began illegally crossing the border where they were able to find work building and maintaining the houses built during the real estate bubble and filling entry level positions in the burgeoning service economy.
Step 2: Natural selection meets adverse selection
In 1995 I was kibitzing with Milty, an avuncular garmento across the aisle at M.A.G.I.C., a Las Vegas Menswear Convention. He had just pulled the plug on his Mexico operations and decided to move it to China. “Mexicans are not like Americans. They worked until they made $200 then they would quit and go back to their villages. We could never get any momentum.” An agrarian worker content with seasonal employment must have seemed odd to Milty. His grandparents probably uprooted their lives at the turn of the century in order to escape a permanent struggle with survival. They came to America and contributed to a gene pool already wired to chase dreams. As we broke down our booths, Uncle Milty tossed me a sample shirt I had been eyeing. “Do yourself a favor. Don’t wash the f:)kin’ thing.”
When manufacturers began deploying maquiladoras right on the US border they begged for what the health insurance industry terms “adverse selection” in their labor pool. The $10 per hour US jobs across the border attracted Mexicans with the drive to go there, the planning and stamina necessary to get there, the skills to stay there, and the persistence to return if necessary. Those left behind toiled in miserable, unsafe sweatshops for $1 per hour or less and left as soon as they got the chance.
So you know what these maquiladoras got for $1 per hour? Labor that was worth… $1 per hour. This didn’t last long. Whole factories and industries started disappearing to Asia, where employers didn’t have to compete with the American Dream next door or contend with pesky labor laws or monitors.
Q. Now jobs appear to be returning to Mexico from China. Is this good for the US economy?
Mexico is “local” compared to China. Tijuana is certainly more local to Los Angeles than New York is. Local means more oversight, less environmental damage, and a more direct connection between labor and consumer. Opportunities in Mexico at a time of little opportunity here explains why undocumented workers are returning to Mexico. Manufacturers in Mexico are more likely to use US made parts, particularly under NAFTA. Rebuilding Mexico’s supply chain infrastructure after it was gutted by companies relocating to China will also help US manufacturers who import parts.
A “lean” US manufacturer can compete with Mexican manufacturers as long as a weak immigration policy continues to result in adverse selection of Mexican labor. We can’t, however, compete with an economy like China’s with a low wage workforce, held at gunpoint, that grows by 30 million annually. The original intent of NAFTA was to bring wages in Mexico up to the level of America’s wages, and develop a true, viable trading partner and net buyer of our exports. That is a lot more likely to happen now.
And when that happens, work — not workers — will be returning to El Norte.