Mexico's Triple Immigration Whammy

Over the last couple of decades, Mexico has doubly benefited from having the United States as its northern neighbor. The United States serves as an escape valve for Mexico’s legions of unemployed and as a font of foreign exchange flowing from Mexico’s emigrants.

But pressure is now building in Mexico. The escape valve is breaking down, and the font of remittances is no longer gushing.

Over the past several decades especially the United States has provided an outlet for Mexico’s poor, unemployed, and disenfranchised. Since the mid-1990s nearly 500,000 Mexicans annually have found economic haven north of the border.

This relief has been coupled with an ever-rising return flow of remittances from the Mexican-born population in the United States has risen. In 2007 remittances to Mexico jumped 15% to nearly $24 billion – making remittances the second largest source of foreign exchange after oil exports.

But this year Mexico has been hit with a triple immigration whammy. Fewer Mexicans are attempting the illegal journey north, more are returning home, and remittances are plummeting. Any one of these trends is a threat to Mexico’s stability. Together, they may be the gathering of the perfect storm – one that may hit Mexico with its full force in 2009.

Greater Regional Labor Market

Mexico’s labor market is greater than itself. It is a transnational market that has reached deeper and deeper in the United States, extending in recent years beyond such gateway cities as Los Angeles, Chicago, and New York into regions previously unaffected by south-north immigration such as the Carolinas and the rural Midwest.

To keep up with the rate of its increasing workforce, Mexico must provide an estimated 1.2 million new jobs every year. But even in the best of times, the national labor market falls far short. Last year the economy expanded by 3.3%, but it created only 300,000 new jobs – a 900,000 shortfall in new jobs.

Fortunately, Mexico’s transnational market has absorbed much of its surplus workforce. One of seven Mexican workers has sought and generally found work in the United States. It’s been an expanding market until recently. From being a market almost exclusively male and centered in agriculture a half-century ago, the country’s transnational market grew to include the industrial and service sectors. And from being largely a market for seasonal labor, it expanded to become a source for millions of permanent and semi-permanent jobs for Mexican women as well as men.

In years past, the shortfall between jobs created and the number of Mexicans entering the national workforce has been cushioned by the large numbers leaving the country. Those who stayed behind and without employment eked out a living on the edges of the formal economy, selling goods and services in the streets (including a frightening rise in those young men and women have become part of the illegal drug economy).