By SAMUEL PEÑA GUZMAN Social Inequalities and Unemployment

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Social inequalities in developing countries, like ours, seem so normal that few people pay attention to the figures that show the huge differences existing.

Mexico, as a developing country, is no exception and an example will suffice. A few days ago I saw with interest a study made by the School of Graduates in Public Administration at Tecnologico de Monterrey; the study analyzed the huge inequalities existing in Mexico. According to the report, the average income received by the population’s poorest 10% is under 2%, while the wealthiest 10% receives 40% of national income. Amazing, isn’t it?

These figures are significant by themselves and even imply several risks for our country. I think we should not be surprised by the fact that in the recent election more than 63% of the population either neglected to vote or did not vote for the wining candidate. However, considering the differences in income among the population, I think democratic governability is still possible in Mexico; and if we compare Mexico to other Latin American countries, the price being paid here for the transition among political parties or even, as some writers say, for a “democratic transition” – on which I do not necessarily agree – has been a rather low price.

In some other countries, social inequalities have appeared not only in demonstrations and hard struggles for power, but in coups d’etat, civil wars, fraud, violence and total ungovernability.

Thanks God in Mexico we had not reached those extremes, even if social inequalities are similar to those in the countries where there have been violent demonstrations, as those mentioned above.

It is really amazing that in Mexico, one of the first 15 economies in the world, there is extreme poverty in around 18 million people according to the above-mentioned study. Even if poverty in rural areas has been reduced, poverty in urban zones stays the same, and even in some urban areas, mainly in the largest cities, poverty index raises every year, therefore limiting regional economic development. In rural zones poverty has been reduced due to several factors, mainly migration to cities, or in some cases due to government programs to fight poverty and by remittances sent by fellow countrymen living in the USA.

Cities like Mexico, Guadalajara, Monterrey, Tijuana, among others, have been the destination of a significant percentage of population from rural zones that have immigrated to those cities looking for better opportunities, causing an increase in unemployment and limiting the economic development of some of these cities.

Insufficient generation of formal jobs and also the persistent problem of poverty in urban zones, causes the pressing need to generate larger economic growth and a larger number of jobs. Therefore, it comes as no surprise that migration to the USA becomes a “relief valve” for Mexico, before the inability to generate employment and underemployment opportunities not only for the currently unemployed, but also for the population that year after year joins the labor market. Every year a labor lag is created and subsequently grows. It seems to be an ever-lasting problem, but such a huge problem that there must be several factors to at least ease the problem in the short term and with a sustainable development policy maybe defeat the problem in 15 or 20 years, if there are favorable and/or required conditions.

Among the several factors to be considered there is, of course, education. According to the study made by Tec de Monterrey, average education of the 10% poorest people in Mexico barely reaches 4 years at school, and for the highest 10% it is 12 years. The difference is very high. Unfortunately population with the lowest income is forced to work to survive and therefore drop out of school. In cases like Nuevo Leon, average education of economically active population is 10.1 years, which is high when compared to other states in Mexico; however, Nuevo Leon still shares the problem of poverty with the rest of the country, even if at a lower degree.

There are many government programs which final purpose is fighting poverty; however, we must invest more in human capital and therefore invest more in education than in government subsidies for current expenses.

The administration of Felipe Calderon, the winning candidate, should make more emphasis in increasing the population’s human capital by focusing in raising education levels.

At the same time, generating new jobs will become essential for a larger economic growth and attenuating the growth of poverty mainly in urban zones in Mexico.

I think social inequalities and unemployment in Mexico go hand in hand, both in causes and in effects. This task is not only the responsibility of the authorities, but involves also the private sector, in order to generate labor and economic opportunities for those who need it more; otherwise we will soon face the problems that have already been faced by many Latin American countries, which main characteristic has been violence and ungovernability. Let’s hope we have “learned in somebody else’s head”.

About the Author Hector Samuel Peña LL.M, MPA Currently works as a Foreign Investment Coordinator for the State Government of Nuevo León, he has LLM Masters in Law from American University, Washington, College of Law, and a Masters in Public Administration from the George Washington University and has advised foreign companies who are expanding operations in to Mexico. He is also a professor at the State University of Nuevo Leon in Monterrey, Mexico and a Member of the Consejo Mexicano de Asuntos Internacionales COMEXI. The point of view is strictly from the author and does not represent the vision on any of the author institutions relationships. He can be reached at: samuel.pena@mexicoglobal.com.