The Debt the Government Does Not Want to Recognize

By Saul Escobar Toledo

MEXICO CITY, Sep 11 2020 (IPS) - The national occupation and employment survey prepared by INEGI, with figures updated to July 2020, shows an improvement that has occurred in the last two months. However, the employment situation, compared with the data existing before the pandemic still shows serious problems:

Saul Escobar Toledo

Of the 12 million who left the labor market since the beginning of April, 7.2 have already returned; the other 4,800,000 declared they needed a job, but they are not looking for one. In addition, another important portion of the workforce became part of the people characterized as ” absent with a labor link “, that is, those workers who did not attend their work centers but were not fired. It is not known if all of them have been paid their full wages and benefits and, above all, if these millions of absent will someday return to labor or will be laid off permanently.

INEGI registered an employed population of almost 50 million people (49.8) ; It should be noted, however, that the increase between June and July corresponded to the male gender, with an increase of 2.2 million people at the same time as there was a reduction of 750 thousand women .

Throughout these months, one of the sectors hardest hit has been that of the self – employed: 20% of them remained inactive in April; 16% in May; 10% in June and only 2% in July. Unpaid employees (which only receive tips or payments in kind) were also severely affected: 21% did not work in April, but in July were almost all toiling.

If we measure the phenomenon taking into account the informal workers ( who work on their own account or in the service of an employer), the figures are more dramatic: in April 10 million stopped working, in May 8, in June 5, in July still 3 million . If we accumulate all these figures, it gives us a total of 26 million, which would give an idea of the days / worker lost in recent months and the income that was not received. Some lost only a month, others two or three, and still in July many did not receive any income at all. The paralysis has affected mainly the female gender, but the number of victims is impressive.

Meanwhile, the rate of open unemployment was 5.4% in July, which yields a figure of 2.8 million persons. Here again, the rate is higher in women than in men (6.3% vs. 4.8%). By age, those most affected have been those between 24 and 44 years old, which represent more than 50% of the total. It must be emphasized that this rate has increased, not decreased, as it accounted for 4.7% in April.

Even more serious, the underemployment rate, although it fell in July compared to the previous month, is still 18.4%. This represents an increase of 3.21 times in April; 3.78 in May; 2.75 in June and 2.45 in July compared to the historical average prior to the pandemic. This means that new occupations have become more precarious, insecure s, worse paid and surely very poorly protected.

In short, we have several problems. The damage caused by economic paralysis and the pandemic : 1) affected formal workers who were laid off and have not found another job; or have not attended to their workplace and are living in uncertainty; or they have sought refuge in underemployment (and have lost income and benefits) . And 2) self – employed and informal workers who have had no income during several or all these months.

All this damage is a fact, has already happened but so far nothing has been done to restore it. As anyone can see, it is a large social debt. The repair of this immense gap in the economy of Mexican families cannot be solved with the social programs that were already planned. It is not possible to support an entire family with the elderly pension, or with student grants.

For example, the pension program for the elderly, which has the more substantial budget and covers a larger number of people. The amount of money delivered is not only insufficient today (around 600 dollars per older adult between January and June 2020, that is 100 dollars per month according to the Second Presidential Report).

Undoubtedly, the damage caused, the income that has not been replaced, will lead to an increase in poverty (between March and May the number of poor increased from 36 to 55% according to CONEVAL). The inequality also has increased. According to some studies, the wage bill suffered a drop of between 6.6 and 13.8% in the second quarter of the year calculated annually. This has resulted, naturally, in a reduction of consumption of around 20% (annually comparison, even with the rise in June and July).

A country with greater poverty and more inequality cannot be a desirable outcome for a government that has set out exactly the opposite. Above all, because in the face of these phenomena, the government has not proposed any special action.

On the other hand, the decrease in the family´s income points to a slower economic recovery due to the fall in purchasing power. The increase in minimum and contractual wages have not been able to remedy these losses and surely will not do so in the remainder of the year due to the magnitude of the economic slowdown.

The 2021 budget represents an opportunity to make up for something that Mexican families have lost; to prevent further impoverishment and to stimulate faster economic recovery. It has been argued, by the president of the republic, that a growth in government debt may be detrimental to an indeterminate tomorrow. However, the government do not want to recognize that the Mexican state has already contracted a huge debt with millions of families who have lost their income since March. Finding a formula to pay this social debt and at the same time avoid a financial crisis in the future is not impossible, nor is it a dead-end dilemma.

At the same time, the possibility of a progressive fiscal reform that serves to pay off this social debt and for a more vigorous economic reactivation cannot be ruled out for political reasons (the 2021 elections or the fear of a negative reaction from a privileged sector ) . The most surprising is that the government announced a reform of the pension system that precisely proposes an increase in employer contributions and requires increased public spending. This equates to an increase in taxes and an increase in the federal government debt. How, then, do you refuse to charge a greater tribute to the richest and most prosperous, and at the same time propose a scheme to favor big business (the companies that manage the pensions)?

A further reduction in public spending and investment (what they now call austerity) can only have the result that, once again, the cost of the crisis will be borne by the vast majority of the population. Its consequences would be equally negative for recovery of production, consumption, and prosperity of the country.

The government must face the most important question of all: give Mexicans the opportunity to overcome this crisis with the least possible losses. If they do not, all the architecture of the promised change will become fragile and maybe a mere rhetorical exercise.