NAFTA-USMCA and Wages in Mexico

Abstract

This note focuses on some features of Mexico’s labor market that, in our view, are crucial to understand the effects of NAFTA-USMCA on wage in Mexico. In our assessment we find that (i) Despite NAFTA, average wages in Mexico did not increase from their pre-NAFTA levels, although in its absence they would have been marginally lower. (ii) So long as Mexico’s current domestic regulations remain -particularly those pertaining to labor and social insurance- it is unlikely that the U.S.-Mexico-Canada Agreement (USMCA), the trade pact that superseded NAFTA in 2019, will lead to higher average wages. (iii) If the USMCA increases labor costs significantly in the USMCA-related segment of the economy, aggregate productivity in Mexico may suffer.

PhD candidate

I am a PhD student at Toulouse School of Economics. Former analyst at the Inter-American Development Bank