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Temping Down Labor Rights: The Manpowerization of Mexico

by Kent PatersonSpecial to CorpWatch
January 6th, 2010

El Centro de Reflexión y Acción Laboral (CEREAL)

For more than four years, Margarita Estrada assembled and tested computers at a Foxconn factory in the central Mexican city of Guadalajara. Preparing 120 CPUs an hour for shipping was a “stressful” job, the young woman says. Part of Estrada’s duties involved training the large numbers of new workers. Despite dire employment opportunities in Mexico, many new employees never return after a day or two. “People didn’t last,” Estrada recalls. In her stint at the Taiwanese-owned plant, Estrada’s wages went up from slightly more than $8 to about $10 a day, plus hard-to-attain production bonuses, the former worker says.

Yet even after years at Foxconn, Estrada never became a formal employee of the electronics industry giant. Instead, Spyga, a temporary employment agency, employed her and most of her co-workers on the shop floor. “There were few people working directly for Foxconn, about five of them." Estrada says. "That’s all.”

In 2007, Estrada was laid off and offered $300 in severance pay. Suspecting the amount fell below Mexican legal standards, she knocked on the doors of Cereal, a Jesuit-founded labor advocacy and watchdog group. After some back and forth with two sets of employers, she eventually walked away with nearly $2,000 in severance pay.

In Guadalajara and the Mexican electronics industry in general, Foxconn's employment set-up is the norm. Nearly 70 temporary employment agencies operate in Guadalajara alone, says Jorge Barajas, Cereal’s local coordinator, and seven pages of the bulging Guadalajara phone book are filled with the private firms.

According to the veteran labor activist, temporary job agencies in Guadalajara boomed when the local electronics industry expanded in the mid-1990s. Transnational companies including Manpower and Adecco now dominate the electronics industry labor market.

A 2007 Cereal study found that approximately 60 percent of the 400,000 workers in Mexico’s electronics industry work for temporary agencies, with some companies employing as much as 90 percent of their workforce through sub-contractors.

In 2008 and 2009, more than 4,000 workers turned to Cereal for help, and 95 percent of inquiries in Guadalajara involved the temp firms, Barajas says.

“Though fewer in number, [foreign-owned companies] are the ones that accumulate the majority of workers’ complaints,” says Barajas.

Common complaints include inadequate severance pay, skimping on benefits, low pay, and the seemingly never-ending temporary contracts that go from month-to-month or even fifteen days stretches.

Meager Wages


Three hours from Guadalajara, the city of Aguascalientes hosts plants run by Flextronics and Sensata, formerly Texas Instruments. A Sensata worker, who declined to be identified for fear of losing her job, echoed similar complaints. Before the economic crash, making the leap from a temp to a permanent job with Sensata required months of perfect attendance and near-spotless performance, she maintains. Most workers are single mothers, divorcées and widows juggling domestic responsibilities and trying to raise families on low factory wages.

After almost a decade at the plant, she pulls in less than $50 for a 45-hour week. “For all we do, it is not a fair salary,” she contends.

Aureliano Rosa, who has five years' experience in the Guadalajara high-tech industry, recounts a similar tale. The agencies, he says, under-compensate workers' skills and unnecessarily skim off wages and benefits such as Christmas bonuses that would be higher if the workers were employed directly by the companies.

Workers barely "survive," Rosa said. "If I were married with a family, there would be no way to survive on those wages." Before he was let go from his latest job earlier this year, he earned about $70 per week for job responsibilities that included helping design computer work stations.

Struggling under poor conditions

Nationwide, other problems documented by Cereal include sexual harassment, chemical exposures, accidents, union suppression and undignified treatment, such requiring U.S. high school-like passes for bathroom breaks. A Cereal investigation found Manpower and other employers routinely asked prospective employees about pregnancies, sexual histories, tattoos and union affiliations. In many cases, new hires could expect medical exams and drug tests, according to the labor rights group.

In response to a complaint from Ciudad Juarez, the Dutch-owned Philips Company assured Cereal in writing that it did not “tolerate any type of discrimination,” but justified the drug tests as a requirement for Business Anti-Smuggling Coalition certification. The voluntary export protocol between private companies and government customs agencies was established after the 9/11 attacks to curb terrorism and narcotics trafficking.

For years, Cereal has talked with employment agencies and the companies that contract them. Barajas credits these discussions, which center on the Electronic Industry Citizenship Coalition’s (EICC) Code of Conduct, for improving conditions at places such as Foxconn, and for winning concessions for workers. But he insists that there needs to be greater progress on freedom of union association, reducing accidents and chemical exposures, sexual harassment, and overall structural inequities.

Labor Rights

The Code of Conduct, subscribed to by more than 40 major companies in the electronics industry, lays out human rights, health, occupational safety and labor principles for its members. It is explicit about the right to join unions, which are usually non-existent or ineffectual in Mexico’s electronics industry. Companies with a Mexican presence adhering to the Code include Foxconn, Jabil, Philips, IBM and others. In 2009, the EICC planned to conduct more audits in China and Mexico.

“We expect members to embrace high standards of ethical behavior, treat employees fairly and with dignity and respect,” EICC spokesperson Wendy Dittmer e-mailed. In a subsequent phone interview, Dittmer declined to comment on specific situations involving member companies, but reiterated her organization’s expectation that the Code of Conduct applies to all segments of the global supply chain, including labor subcontractors.

Dittmer said the ongoing talks with Cereal and other groups were “critical” for understanding “alleged issues that come up,” and in solving problems.

Last summer workers’ grievances boiled over into Guadalajara street demonstrations. Organized by the National Coalition of Electronics Industry Workers, a couple dozen workers staged protests at several employment agencies against arbitrary firings and paltry severance payments. In some instances, former employers acceded to protestors’ demands for better severance compensation.

A confusing and thorny question underpins labor-management conflicts in the Mexican electronics industry: Who is responsible for labor law violations – the employment agency or the contractor? Even though Mexican labor law holds the contractor ultimately responsible, the Mexican federal labor agency responsible for hearing workers’ legal complaints sometimes insists that grievances should be directed at the sub-contractors, Barajas says.

In July 2009, a new federal law went into effect that reaffirmed the responsibility of the contractors as the employer, but it required subcontractors to file detailed employee payment reports with Mexico’s Social Security Institute.

A larger issue is whether temporary agencies should even have a place in the industrial scheme of things. While perhaps most advanced in the electronics industry, labor outsourcing has spread to many economic sectors. Using official Mexican census sources, a recent study by the Mexico City-based Center for Labor Research and Union Advisement (CILAS) reported that fully 10 percent of the nation’s workforce was employed by temp agencies. Likening labor sub-contracting to legal human trafficking, CILAS researcher Matteo Dean contends that outsourcing violates Article 3 of Mexico’s labor law, which prohibits work as an article of commerce.

Dr. Octavio Maza, professor of sociology at the Autonomous University of Aguascalientes, says the temp boom is part of wider trend toward less stable and poorly paid work. In a local study, Maza says he and his colleagues were surprised to learn that informal street vendors actually had steadier employment and income than many temporary workers.

Citing government and private sector reports, the Mexican press recently reported that more than 12 million workers (almost half of them women), or between 28.1 and 32.5 percent of the economically active workforce, are in the informal sector.

Coupled with the surge in temporary employment, the overall trend bodes ill for reviving a tanked economy, Maza contends.

“The important thing to keep in mind is that this downward spiral in labor conditions affects not only the workers,” Maza adds. “It’s a trend that pulls down the rest of the population.”

Mexico’s Electronics Industry

For U.S. consumers who could still afford gifts this holiday season, there is a good chance they purchased a product that passed through Mexico. In the global electronics production chain, Mexico serves as the main assembler of Asian-produced components for electronics exported to the United States.

Mexican hands piece together television sets, computers, cell phones, Xboxes and assorted gadgets. Along with the Guadalajara hub, other industrial cities include Tijuana, Mexicali, Chihuahua, Ciudad Juarez, Aguascalientes, Monterrey and Reynosa, as well as the state of Mexico.

Foreign-owned, electronics factories in Mexico tend to be supplier plants for the big boys of the industry: Dell, Hewlett Packard, IBM, Motorola and others. Subcontractors with Mexican factories include Foxconn, Flextronics, Solectron, Jabil Circuit, and Sanmina SCI, among others. These firms, in turn, sub-contract the majority of their workers through U.S. and Mexican-owned employment agencies.

From 1992 to 2006, the value of Mexico’s electronics exports exploded from about $6.5 billion to $46 billion. Mexico’s membership in the North American Free Trade Agreement and other pacts favors the export-oriented industry. To entice companies, the Mexican federal and state governments offer zero or preferential tax rates on imported inputs, industrial park infrastructure and, lately, even wage subsidies.

State subsidies for high-tech companies are standard across the globe, sometimes with less-than-desired results. In Albuquerque, New Mexico, an early center of electronics manufacturing, companies including the old GTE-Lenkurt and Motorola got generous tax breaks – only to shift production to Mexico.

The post-2008 devaluation of the peso made Mexican labor even cheaper for U.S. and European companies. Cereal’s most recent study, however, found that average wages for electronics industry workers dropped 10 percent during 2008 and 2009.

Labor production costs in Mexico now rival those in China, Cereal found. Emerging from the depths of the current global recession, companies such as Nokia are resuming production with an even greater percentage of temporary workers, according to Cereal.

The global economic meltdown complicated Mexico's plans to move from being merely an assembler of products to becoming a manufacturer of computer chips. Silicon Border – an ambitious, cross-border project to lure big chipmakers to Mexicali on the Mexico-US border – was unveiled in 2005, but it has yet to churn out any chips. The centerpiece was a 10,000-acre industrial park built with the blessings of the Baja California and California state governments. The governor of Baja California during the construction of Silicon Border was Eugenio Elorduy of President Calderon’s PAN party. It later emerged that he was a member of Silicon Border’s advisory board after leaving office.

Manpower

The biggest player in Mexico's temp worker market is Manpower Inc. Founded in Milwaukee by Elmer Winter and Aaron Scheinfeld in 1948 it is now a $22 billion company with a presence in 82 countries and territories. In Mexico, Manpower dates back to 1969. Dying this past October at age 97, Winter enjoyed a reputation as a philanthropist, and recently Manpower teamed up with the Washington, D.C.-based Polaris Project to provide job placement assistance to victims of human trafficking. Winter also founded the Committee for Economic Growth of Israel to promote trade and investment.

Manpower Inc. serves as the umbrella firm for several employment agencies including Manpower, Manpower Professional, Elan, Jefferson Wells and Right Management. Not surprisingly, Manpower has taken a hit during the global recession. The company’s quarterly revenues plummeted from $5.7 billion for the third quarter of 2008 to $4.2 billion for the third quarter of 2009.

Manpower and the electronics industry are closely linked. A veteran of IBM, Manpower Inc. CEO Jeffrey A. Joerre’s background with high-tech has been shared by several other current or recent members of the company’s board of directors. In 2008, Joerres earned a total compensation package of about $5.7 million, according to Forbes.

Manpower's offices are now practically as ubiquitous as McDonalds’ Golden Arches and as international. Traveling abroad, Mexican labor advocate Jorge Barajas noted a “frightening similarity” between temporary workers’ problems in Mexico and in the Philippines. Phone calls to Manpower seeking comment for this story were not returned.

Perfected in the U.S. back in the 1970s and 1980s, the temporary employment system dominated by companies like Manpower is now firmly rooted around the world. The Manpower model has helped inspire legislation currently kicking around the Mexican Congress that would reform the nation's labor law and give temporary employment a stronger legal status.

As Mexico prepares to celebrate the anniversaries of both the 1810 War of Independence and the 1910 Revolution, Guadalajara worker Aureliano Rosa finds a certain irony that labor standards achieved in the 1917 Constitution that strictly governed working hours and benefits could go out the door.

"I always have said that in the past the businessmen depended on the government," Rosa added. "But now, the government depends on the businessmen."