Income And Wealth Gap In Mexico: The Reasons And Political Instruments Of Its Decrease

Income and wealth gap in Mexico: the reasons and political instruments of its decrease

It has been revealed by Oxfam that only a few people (85) have the same wealth as half of the world’s population, and only one year later the figure had been reduced to 80 people. It is alert to see how despite being from the fourteenth economy of the world, there are 53.3 million people living in poverty. Our country is in an alarming cycle of inequality, where a select group of people have benefited from the little economic growth that Mexico has had in the last two decades.

Fighting all that inequality is a task that touches us all, since the most affected people with all this are the poorest, and those put aside for their race, gender, geography, etc. Reduce inequality in Mexico makes sense to guarantee the future of all.

The country is within 25% of countries with the greatest inequality in the world and there are more than twenty -three million people who cannot acquire a basic basket. While the richest in Mexico concentrates 64.4% of all the wealth of the country. The number of millionaires in Mexico grew by 32% between 2007 and 2012. The number of billionaires in Mexico has not grown much in recent years, today is only 16. What has increased and how is the importance and magnitude of its wealth. In 1996 they were equivalent to $ 25.6 billion;Today that figure is $ 142, 900 million dollars. This is a reality: in 2002, the richness of 4 Mexicans represented 2% of GDP;Between 2003 and 2014 that percentage rose to 9%.

This is a third of the income accumulated by almost 20 million Mexicans. It is a big problem that our fiscal policy favors who has the most.

It is not easy to be able to make a comparison about inequality in Mexico, with respect to other countries. Since the data about the subject, they are not necessarily comparable and are very scarce, as well as take into account that the measurements in each country are very different periodicity.

According to the graph of the “evolution of inequality in Mexico”, which comes from the database of the Center for Distributive, Labor and Social Studies (CEDLAS) that together with the World Bank maintain the socio-economic database of LatinAmerica and The Caribbean (Sedlac), and the OECD INCOME Distribution Database of the Organization for Economic Cooperation and Development (OECD). We can observe two relatively important things: 1) that in the mid -nineties and 2010 the inequality of income in the country, and 2) decreased that the magnitude of inequality in Mexico is much greater than it was in the early eighties.

Thanks to the remittances of low -income Mexican households and the targeting of some social programs, there was a recent reduction in inequality. However, everything analyzed, only corresponds to the distribution of income, since there are no official figures on the wealth of Mexico, and if we compare sources, there may be variations between them.

It always seeks to make a correct analysis of the data, however it is impossible to obtain with total veracity the information provided, for example: in the INEGI surveys people are not always honest when answering what is requested.

Although the number of billionaires in the country has not grown significantly, 16 Mexicans of that category appear today. What has increased notoriously is the magnitude of their wealth, since between 1996 and 2014 the average fortune of each member went from $ 1,700 to $ 8.9 billion of dollars. A clear example of one of these members is Carlos Slim, who went from just over 1% of GDP to almost 6%, and in that period he passed from number 18 in the world multimillionaire ranking, to the first two places from2010.

Among the 4 main Mexican billionaires is: 

1. Carlos Slim 
2. Germán Larrea 
3. Alberto Bailleres 
4. Ricardo Salinas Pliego

    

These four have characteristics in common, such as all significantly derive from privatized sectors, concessioned and regulated by the public sector.

The lack of economic competence has been a factor that has influenced abuse by some companies, taking advantage of the certain monopoly power they have. Such was the case of Carlos Slim, who, being unique as a company, seized Telmex in 1990 and has openly exploited the monopoly power of telephony. Network control allowed him to put very high rates, and thus obtained extraordinary income for his company. All this made him become the telecommunications giant and a short time later in one of the richest men in the world. All at the expense of Mexicans who pay you for years high rates.

On the other hand in the mining field between 2000-2010, the extraction of gold in Mexico was more than double the extraction made over 300 years of the viceregal era in Mexico. The accelerated way of production allowed the enrichment of entrepreneurs dedicated to this sector, and among them two of those already listed above.

The design of the tax system is one of the policy characteristics in which the Mexican economic elite has managed to significantly influence. On the contrary, it seems to be designed in such a way that the redistributive effect of fiscal policy is minimal, if not void.

In recent decades, Mexico has tended, systematically and gradually, to modify the distribution of income between what corresponds to the payment of the capital factor and what corresponds to the payment of the work factor. 

Growth in the economy can be affected when income is distributed unevenly, which depends on many things, such as the weakness of the domestic market, consumption decisions or the investment capacity of small businesses. The reasons through which inequality affects growth, are based on the fact that there is such a demand for redistribution that opens the door to policies that harm investment decisions or, that create some political and social instability that finally influenceinvestment decisions.

A big problem of high inequality is that our country not only has low economic growth rates, but that little is discriminatory, since there is a little relationship between the growth of per capita income and the evolution of poverty rates in Mexico in Mexico.

The increase in the minimum wage in Mexico has always been very scarce and below the price increases, and it was not until 1996 that this changed a bit. But even if they have increased, the purchasing power has decreased throughout the last decades. This minimum wage policy explains, the increase in inequality that was observed in Mexico between 1984 and 1996. The authors analyzed the impact on the minimum wage policy on salary inequality and, in particular, in the compression of labor income in the lower part of the distribution, which occurred precisely in those years.

The impact of all this affects many people every day since, someone who works their full day, and receives their salary, is still considered poor, and if with that salary it must keep one more member of their family, toBoth are considered extreme poor, and the salary is nothing close to even reaching a sufficient basic basket to eat with dignity. All this violates what the Constitution says where a minimum wage should be sufficient to guarantee a dignified standard of living. And it is so serious that we are the only case throughout Latin America, since in no country the power to buy with a minimum wage has been so lagging. This in addition to explaining inequality, continues to limit the possibilities of all people who receive that salary.

As is known, the consequences of the concentration of income and political capture are sad. Another is that there are large segments of the population that are completely excluded from any progress in economic and social well -being. Undoubtedly, in no case is this as evident as in the case of the indigenous speaking population (in 2010, 6.8 million Mexicans). The discrimination and exclusion of the development process to this segment of society have been systematic. If there are advances in the matter, they are very minor.

One of the data that best reflects the marginalization and exclusion of this segment of the population is the composition based on their multidimensional well -being. While 38% of the indigenous speaking population lives in extreme poverty, the corresponding percentage for the total population is less than 10%. This implies that the extreme poverty rate for the indigenous speaking population is almost 4 times higher than that of the general population. To that we add moderate poverty and we will find that 3 out of every 4 indigenous language speakers are poor. The data is significantly related to what happens to the general population, where less than half of the population is considered poor.

Despite not having mentioned gender inequality before, it is one of the most outstanding in the country, and it is of such importance that a study requires.

Mexico occupies the 80th place of 142 countries that participate in regard to gender inequality, and the worst results are located in regard to the participation of the workforce, salary equality and estimated income.

In general, these results are confirmed by studies. For example, that of ECLAC (2013) on “Decent work and gender equality” points out that the average monthly labor income of women in Mexico in relation to the entry of men fluctu.2% for people over 55, up to 84.4% for people between 15 and 24 years old. Although this would seem to suggest a lower salary inequality for younger people, differences are still quite notable. For its part, an Inegi study (2014) reveals that the degree of wage discrimination for women in Mexico fluctuates significantly according to the type of work. Thus, for example, the salary for women in industrial activities or as transport operators is 30% and 24% lower than that of men, respectively. While in activities such as merchants, professionals, officials or office workers, the gap fluctuates between 17% and 10%. Finally and in agricultural activities, protection or surveillance or as education workers, there seems to be no gap between the salary of men and women. In the case of personal services, the gap favors women in about 9%. Finally, a recent study by Arceo y Campos (2014) has estimated the gender salary gap based on the information of the economic censuses from 1990 to 2010. According to its results, the salary gap in Mexico in 2010 between men and women was 26%.

Regarding discrimination in public education vs. Private Education, we can say that 48% of public schools lack 31% drinking water, 12.8% do not have bathrooms and 11.2% do not have access to electricity. So 61.2% of them, students do not have access to a computer and 80% have no internet. Taking all this into account, we can see that public schools are definitely at a disadvantage in front of private schools, and not counting that some of them do not even have access to basic services such as electricity, drinking water, bathrooms or elementary infrastructure.

Violence in Mexico has increased visibly, a hypothesis is that poverty is affected due to violence: such was the case of the 43 normalist students who disappeared in Guerrero, and I think it is so, since every day many studentsWe leave the house without knowing if in the afternoon we will return, due to the entire situation of the country, and because of that, others prefer not to emigrate to the city where their dreams are, but to stay where they are for issues of greater security.

Some instruments and/or political proposals to reduce economic inequality are:

• Creation of an authentic social state
• More progressive fiscal policy
• Best focused expense
• Salary and labor policy
• Transparency and accountability mechanisms

   

All of the above indicated as a program to combat inequality and agenda for the future.

Gerardo Esquivel, economist for UNAM and the College of Mexico and author of the report, indicated that "Mexico is within 25% of countries with higher levels of inequality in the world and is one of the two most unequal countries in the OECD", So extreme inequality in the country must be discussed for ethical, moral, economic and political reasons.

Oxfam launched the equal campaign in Mexico, which seeks that the government limit the influence of elites and seek to reverse social, gender and economic inequality.

"We see with concern the excessive influence of private economic powers in public policy, and it is alarming to observe the interference that this implies for the exercise of citizen rights", said the director of Oxfam Mexico, Consuelo López-Zuriaga.

BIBLIOGRAPHY

1. Oxfam Mexico. (2018). Extreme inequality in Mexico. Recovered from file: /// c:/users/telmex/downloads/unequalized_extrema_m%c3%a9xico_informeoxfam.PDF
2. 3.5 Extreme inequality in Mexico.PDF