New Mexico's Place in the Global Labor Market:  Part I

Background:  I presented a paper a few years ago at a conference on the "New Global Economy" at the University of Tokyo.  I was asked to report on Latin America's role in this "new" global economy, characterized by globalization, free trade, and the information and the communiction revolution.  As a first step in research I looked up the proportion of global labor that was Latin American.  It was much smaller than I expected.  I set out to understand why.  As luck would have it, I turned first to Richard Freeman, a first-rate economist at Harvard, and immediately my paper fell into place.

Freeman had pointed out as early as 2004 that about the time of the Soviet collapse in 1990 India and China both opened up their economies to global competition.  Labor (and capital) in these two countries was now exposed to global competition.  This, in effect, doubled the size of the global labor force from about 1.5 billion to about 3.0 billion between 1990 and 2000.  

Wow!  After a quick glance at wages in China and India, compared with Latin America, the paper wrote itself.  Latin American economies and 1990s could simply not compete on the global labor market with lower wages in these two giants.  The  timing for Latin America wage earners could not have been worse:  Latin Americans, for once, had reluctantly accepted the developed world's recipe for economic growth in those latitudes:  leverage low wages; create conditions favorable for foreign maquila plants; join the global economy.  But with 1.5 billion new workers offering services for lower wages, Latin America's competitive edge was gone.  A lot of other negative effects in Latin America also fell into place, including the willingness of many political leaders to look the other way from drug trafficking, an industry generating a lot of cash.  Would you rather join a cool, secret organization with limited (but potentially heavy) risk for a hundred thou a year, or work in a maquila plant for $2.00 an hour at a job that might move to China next year?

It has taken nearly three decades for the balance between labor and capital to return to its pre-1990 levels.  But, yes, labor shortages are beginning to show up throughout the world.  The pandemic will hasten this rebalancing, due to our much more acute awareness of the vulnerabilities of long-distance supply chains. In the US the "great resignation" of workers from their jobs is one symptom of this rebalancing, as more workers leave their jobs for greener pastures.  Real wage rates are going up (yes, this will contribute to inflation) and it appears this will be a long-term trend.  Labor unions, surely, will become more potent.

What Did The Great Doubling Mean for New Mexico?

Here in New Mexico labor has experienced a slightly softer version of what happened in Latin America during the past two decades.  The political power of labor unions declined.  There was severe pressure on wages in such areas as call centers as the state seemed to imitate the low-wage economic model of Latin America.  Legal and illegal migration from Mexico increased these pressures in low-paying service jobs for hotel workers and other non-skilled occupations, generating tensions between legacy hispanos with low occupational skills and newly arrived mexicanos.  Public and higher education institutions continued to use an outdated business model that could not connect the supply of labor they were producing with the demand for higher paying jobs; a massive brain-drain ensued and many industries were forced to hire out-of-state temporary or permanent workers to fill jobs New Mexicans could not qualify for.  Retail drug traffickers sought out new markets in rural areas of New Mexico and in big cities.  Would you rather peddle drugs in Northern New Mexico or work at a call center in Albuquerque for $9.00 an hour?  Entrenched interests with skilled lobbyists bought a state government that entertained the public with glittery promises instead of managing public affairs, ignoring changing economic and political environments.  Etc., etc.  You know the rest.  New Mexico drifted in the past 20 years from the top of the bottom third to the bottom of the bottom.  Albuquerque, 50 years ago one of several dynamic cities in the Southwest, suffered serious decay.  The state as a state lost its ganas, as it did in many other states.

Can New Mexico Prosper Under the New Labor Market Conditions?

The short answer is yes, but only if New Mexicans are willing to retool the grossly out-of-date institutions we created after World War II, and demonstrate the ganas New Mexicans demonstrated during the golden age of New Mexico growth between, say, the 1940s and the early 1980s. 

Stay tuned for Part II, which will discuss possible projects for a better New Mexico under conditions of rapid global, national, and statewide economic and political change.