Union Bargaining Power in Mexico and

NAFTALisa Glynn

February 2nd 2011

Research DirectionNAFTA has changed Union bargaining power

NAALC

Complementarity of labour

Why does this matter?

Mexican Wage Inequality

Effects of Multinational Trade Agreements2

Efficient Contracting Model

Union threat point increases

(Surplus Max) U => U0

(Barg. Power) U0 => U1

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Mexican Wage Inequality

(Bosch & Manacorda 2008)

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Mexican Wage Inequality(Bosch & Manacorda 2008)

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Mexican Wage Inequality(Bosch & Manacorda 2008)

“After 1997, The minimum wage is hence unable to account for

this subsequent fall in

inequality.”

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Mexican Wage Inequality(Bosch & Manacorda 2008)

“After 1997, The minimum wage is hence unable to account for

this subsequent fall in

inequality.”

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Mexican Wage Inequality

Low Skilled Industries were protected by TariffsLiberalization lowers wages (Hanson & Harrison 1999, Robertson 2001)

Increased Demand for High Skilled LabourMaquilladoras (Feenstra & Hanson 1997)

Returns to education (Lopez Acevedo 2006, Cragg & Epelbaum 1996, Robertson 2001)

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Mexican Wage Inequality

The Fall in inequality after NAFTA is given much less attention (Robertson 2007, Hanson 2003)

Robust to data source and inequality measureAiola and Jhun (2005), Robertson (2004), Lopez-Acevedo (2006), Harrison & Hanson (1999), Hanson (2003)

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Mexican Wage Inequality

The Fall in inequality after NAFTA is given much less attention (Robertson 2007, Hanson 2003)

Robust to data source and inequality measureAiola and Jhun (2005), Robertson (2004), Lopez-Acevedo (2006), Harrison & Hanson (1999), Hanson (2003)

17% of Mexican Labour Force is Unionized (OECD Labour Force Statistics)

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NAALC

North American Agreement on Labour Cooperation

Set of North American Labour Rights

Legitimacy to Labour Unions

Legitimacy to Labour Grievances

Transparency

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NAALCKay (2005, 2011)

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NAALCKay (2005, 2011)

Now when we have a submission someone in the Mexican government will call and want to know why this, why that. They don’t ignore it anymore, and this didn’t exist before. We spoke but they didn’t listen, we existed but they didn’t see us. I think now that they listen, and they listen because what we do hurts them. And what we do is within the law. (Benedicto Martinez: FAT, 7/27/99)

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NAALC

Kay (2005, 2011) con’t

NAFTA was the common enemyopportunity to meet transnational allies

NAALC required continual partnershipMust File Grievance in a Foreign Country

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NAALC

Common Relative Gain in Bargaining PowerSanctions reduce firm power

Uneven Relative Gain in Bargaining PowerUnions with transnational allies gain the most

Selection Bias

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Complements?Robertson (2006)

Estimated Cross Price Elasticities

Maquiladora sector always a complement

GATT (pre-NAFTA) substitutesMexican & US manufacturing in similar activities

Post-NAFTA: complements12

Complements?

Uneven Relative Gain in Bargaining Powerimpact on whole productivity chain

transnational allies

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Complements?

Kay (2005, 2011) & Hathaway (2000)

solidarity & common mission

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Complements?

Kay (2005, 2011) & Hathaway (2000)

solidarity & common mission ”The idea that we could form an organizing alliance with the idea that rather than just publicly condemn what was going on, we would try to fight it by identifying locations where our jobs had moved and targeting them for organization. And undertaking actual campaigns to improve wages and conditions in those locations, knowing that the result would not be that the work would return to the United States but trying to take the edge of exploitation out of what’s going on here by raising wages and conditions for workers in the Mexican facilities”

(Bob Kingsley: UE, 1/ 23/01). 14

Complements?

Shleifer & Vishny (1993) Corruption

Complements: cheap labour in Mexico will increase demand for US high skilled labour and thus increase wages in those sectors.

transfer payment optimal

UE acting in own self interest (another paper?)15

Conclusion

NAFTA changed Union Bargaining power

NAACL

Complementarity of Labour

Add to Mexican Wage Literature

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