The Future of the US Economy Depends on Mexico.

By Notimex Monday, January 23, 2017 comments


The force behind the US “economic expansion” can be summed up in one word: Mexico.


Since the crash in 2009, employment in the United States totalled 13.6 million workers. Forty-three percent of that growth, or 5.9 million workers, came from Hispanics – some born in the United States, other immigrants. Mexico is undoubtedly the largest country of origin of Hispanic immigrants in the United States. Net migration from Latin America since the recession has been minimal (more Mexicans have left than arrived to the US), so this can be seen more as a “demographic dividend” of Hispanic immigration in the 1980s, 1990s and 2000s.


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More Hispanics are entering their best years of activity, or are too young to withdraw, contrary to the contracting workforce of non-Hispanic white Americans. Excluding Hispanics, the workforce in the United States has remained largely unchanged since 2008.



What happens to workers is that they also tend to be spenders. From 2012 to 2015, Latino households accounted for a significant part of aggregate spending growth. In the future, its impact on consumer spending will likely be greater than that of millennials or those born with the baby boomers.



States with lower Hispanic populations have economies that can best be considered in a managed deterioration, such as Europe or Japan. Michigan, a very industrial state, has one of the country’s lowest Hispanic populations, 4.6 percent of its population by 2012. Its workforce is the same as it was 22 years ago. Its unemployment rate is 4.5 percent, the lowest level since 2001 as employers find it hard to find workers.




It should come as no surprise, then, that nine of the eleven new car plants built in North America since 2011 are in Mexico.



This move abroad is not necessarily bad news for workers in the Michigan auto industry.. The various high growth states in the South and West and the largely low-growth white states in the Northeast and Midwest face different labor challenges in the next generation, but in both cases Mexico will have to be part of the solution.



In the South and the West, the problem will be to find enough workers to sustain the production of the necessary housing and infrastructure, as well as all other services sector jobs needed for a growing economy. In the Northeast and Midwest, where labor forces contract and populations age, the alternative is to import workers to fill the labor gap or export part of the labor, to release smaller endowments so that they perform other tasks.




Why does Mexico bring such an important part of the labor force to the US economy – both within the United States and south of the border? Because it is one of the few countries in the world that has the geographical and demographic profile to support the labor needs of a country as large and dynamic as the United States. It is the 10th largest country in the world and still has a growing young workforce, and is next to the United States. Also because well established cultural ties exist between Mexico and many parts of the United States, and because there are trade agreements.




And finally, in the short term, Mexico is the best alternative. Since World War II, when Mexican rural workers arrived in the United States to meet demand during the war, Mexico was always the default response to labor shortages in the United States. Highly qualified immigration from China and India is fantastic, but it is unlikely to solve the shortage of labor in construction or gastronomy. And in view of the political resistance to immigration even from a family ally like Mexico, it is hard to imagine popular support for mass immigration from elsewhere.



With regard to the US workforce and the US companies that move jobs abroad, the future of the US economy will probably be “Made in Mexico”.




*Elliot Bullman is an International Financial Advisor with 15 years of experience in the field of finance and investment.