Income disparity in Mexico is dizzying ... and growingSanta Fe in the west of Mexico City is the symbol of Mexican inequality. Gleaming skyscrapers look down on the poor neighborhoods where low-wage workers live. Photo: Rubén Darío Betancourt.

Income disparity in Mexico is dizzying … and growing

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The gap between the rich and poor has increased so much in recent decades that Mexico is ranked dead last in income equality among OECD nations. It’s a country that’s home to the richest man in the world, and to 61 million others who cannot afford a minimally decent standard of living.

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Being a child in the midst of poverty. Photo: Cuartoscuro.

(First part)

The heights in Santa Fe can induce vertigo. In more ways than one.

At half a million square meters containing 500 establishments. Centro Santa Fe in the far west of Mexico City is the largest commercial plaza in Mexico.

There’s a kind of lady’s handbag available there that sells for 690,000 pesos, or $46,000 dollars. There is also a young woman named María who cleans one of the bathrooms there for 19 pesos an hour.

If María wanted to buy one of those purses, she would have to save every centavo she makes for 15 and a half years.

The handbag, which features a gold chain for a strap, is a French-made limited edition, but it can be bought at high-end stores in Mexico. The salesperson who handles the purchase, however, is not likely to ever buy one. He or she makes 10,000 pesos per month, about $700 dollars, working in one of the nation’s top luxury department stores.

At Sanborns, the store and restaurant chain owned by Carlos Slim, the world’s richest man, the young women who sells books and magazines make half that, about 2,500 pesos per each two-week pay period, or quincena. Slim earns that amount every 20 minutes from banking gains alone.

Inequality has increased across the globe over the last three decades, but Mexicans are advanced students of unequal distribution. In Mexico, the richest 10 percent earn 30.5 times more than the poorest 10 percent. Using that measurement of inequality, Mexico is the most unequal of the 34 nations that make up the Organization for Economic Cooperation and Development (OECD).

Even in countries in severe crisis the gap is not as large as it is in Mexico. In Spain, for example the rich earn 13.8 times more than the poor. That’s 3 percentage points more of a difference than in 2006, but  still less than half of what it is in Mexico today.

By way of comparison, in countries with well-established welfare models, such as Finland, the adjusted gap is around 5.5 percent.

In Finland, the poorest 10 percent have access to some state help with the costs of food, clothes, personal hygiene, haircuts, a newspaper subscription, telephone bills and even a modest hobby. The idea is that all are entitled to a dignified standard of living.

In Mexico,  the poorest 20 percent — 23 million people —don’t have enough to eat three times a day.

01 OECD Comparison
Design: Animal Político

 

The absurd minimum salary

According to data from INEGI, the National Statistics Institute, 49.5 million Mexicans had a job in 2014. The minimum salary is 70.1 pesos (less than $5 dollars) per day in the better-paid zones, such as Mexico City and other urban areas. But the “basic food basket” — the minimum amount of food to maintain health — costs more than half of that at 42.8 pesos.

What’s more, according to INEGI, the average Mexican has at least one economic dependent, meaning the official minimum salary isn’t enough for the two of them to eat.

It gets worse. The government also sets monthly minimum well-being guidelines, which is the basic food basket plus other essential expenditures needed to live, such as housing, transportation, clothes, basic hygiene, health care, and education. That minimum is 2,628 pesos ($175 dollars) in urban areas and 1,629.32 pesos in rural areas.

More than half of all Mexican workers — not just those earning the minimum wage — don’t make that much. They are poor despite having a job — the working impoverished.

 

 

María, the cleaning woman at the Centro Comercial Santa Fe, earns 3,600 pesos per month, about $240 dollars. She walks three kilometers to work every day to save the 5-peso bus fare. At 32, she would like to have a baby, but she wouldn’t be able to feed a child.

Adriana, the young woman who sells books at Sanborns, would not be able to study if she didn’t live in her parents’ house.

Their situations would be even worse if they lived in states such as Chiapas, where 70 percent of workers earn less than two minimum salaries.

“The situation is serious to such a degree that it violates what’s stipulated in the Constitution,” says Gerargo Esquivel, an economics professor at Harvard. “The minimum salary must guarantee a decent standard of living.”

At the same time, Mexico is second only to Brazil in the number of multimillionaires in Latin America. The net worth of Slim alone is equivalent to 6.3 percent of Mexico’s gross domestic product. The combined income of the poorest 20 percent — almost 25 million people — is equal to only 4.9 percent of the GDP.

Along with Slim, there are 2,540 Mexicans whose net individual assets reach $30 million dollars or more. They would fit into two Metro trains, but control 43 percent of the total individual wealth in the nation.

Meanwhile, 61 million Mexicans, the equivalent to Italy’s total population, cannot afford a decent standard standard of living.

A major obstacle to facing the inequality problem, according to ecologist Cristina Bayón, who specializes in inequality and social segregation, is that it becomes “naturalized” — that is, people get used to it. “The unequal society has always existed and there is an extremely high tolerance  of it, which explains why the rich can be so ostentatious in this country,” Bayón says.

Óscar, like Adriana, is a salesperson at Sanborns. He was there the day that Carlos Slim’s son arrived at the store. “They let the boss know in advance,” he remembers. “A lot of bodyguards came first and closed the store, so he had the store and the restaurant all to himself. But he was very nice.”

Asked how he felt about working for the world’s richest man, Óscar replies, “Well, yes, it’s strange to think that you don’t earn enough to survive, and he has so much. But I understand that he provides jobs.”

Óscar is making these comments on the way to a Metro station. It will take him an hour and a half to get home.

There is so great a wealth difference between Óscar or Adriana and their employer that it’s hard to imagine them having anything in common. They may vote in the same elections and they may root for the same soccer team, but the only tie that truly binds them is a work contract. In Mexico, when the poor and the rich are on the same side, it’s because one employs the other.

Rocío cleans at an advertising agency for the same pay as María, 1,800 pesos per fortnight, with benefits as required by law. She remembers her last splurge. although she didn’t pay for it. It was two years ago when her son, a waiter, invited her to eat in an Italian chain restaurant to celebrate her first payday. The average meal price per person in the restaurant is 250 pesos, more than two days wages for Rocío.

The newest employee in the office where Rocío works, named Fer, has a degree in marketing, and earns 3.5 times more than Rocío. She’s an independent contract, so she works without benefits.

Jazmine is a senior accounts executive at the same agency, whose clients include the top satellite television company in Mexico. She earns five times more than Rocío. Just on transportation to get to work and a company-subsidized daily meal, she spends 120 pesos, almost what Rocío and María earn in a day.

Another account executive, Ana, the most senior employee in the office, earns 25,000 pesos a month. That’s twice what Fer earns, and seven times what Rocío earns, but it’s not enough to have a house of her own.

Despite the disparity in their incomes, Fer, Jazmine, Ana and the highest-paid employee at the agency, an executive who earns 80,000 pesos a month, all consider themselves middle class. Adriana, at Sanborns, also considers herself in that class (her reasoning is that she attends a private school, even though her wages can only pay the tuition). So does Óscar. He may earn little and have to spend three hours a day getting to and from work, but he wears a suit.

Middle-class inequality

There’s no commonly accepted definition of what is meant by the term “middle class.” The INEGI made a stab at a classification when it started to divide society into seven income strata based on data compiled during a major 2010 national survey of household income and expenditures called the ENIGH 2010.

According to that INEGI model, the maximum income still considered middle class is 21,801 pesos ($1,453 dollars) per month. If you make more than that, you’re in the top 2.5 percent of the nation’s earners. You’re upper class. You and Carlos Slim.

Adjusting the data for inflation since 2010, the lower limits of the middle class seem even more absurd. If you live in a city and earn 4,000 pesos per month ($267 dollars), you’re in the middle class. Rural workers only need earn 3,195 pesos per month to be considered middle class.

Some consider middle-class status to be as much aspirational as economic, but even in that sense it’s a social illusion. Luis de la Calle, a free-market economist, caused a stir five years ago when he maintained that Mexico was now a middle-class country. For De la Calle, being middle class in Mexico has to do with identifying yourself as such, perceiving yourself as distant from the poor as well as the rich, even though that could mean enormous income differences within the so-called middle class.

“The Mexican middle class is not necessarily close to the standards of living of the international middle class,” De la Calle wrote. “Despite differences in income levels, there exists (among the ‘middle class’) similarities in the conception of their lives and their place in society.”

What social class do you belong to
Design: Animal Político

 

Jazmine, the senior accounts executive, has a visa for entering the United States, and she spends vacations in places like New York or exploring green paradises like Costa Rica. But Monday through Friday, she commutes some 35 kilometers to and from work in public transportation, taking up two hours of her day.

She tried moving closer to work from her home at the border of the Federal District and the State of Mexico to Roma, a pleasant Mexico City neighborhood known for its cafés, galleries and restaurants. For three years she was able to sleep more, but the costs were too much. Now she rents a house for less than what she paid for a room in Roma. She is paying off her credit card debt and hopes to start saving.

When her parents were the age she is now, they already had three children and a house of their own. Her mother was widowed at age 35, when Jazmine was 8 years old. But Jazmine’s mother was still able to provide her and her siblings with a private education through high school. Once in college, Jazmine started to work. Ten years later, and with a more prestigious job than her mother had, she still finds it impossible to reach the goals her mother achieved.

Mexicans’ purchasing power has declined by two-thirds in the last 40 years. In 1976, a family earning minimum wage could buy four times as much as today. Poverty levels have remained stable for the last 20 years, but the per-capita GDP growth rate has been more than 1 percent annually in those same 20 years.

If the poor continue to be poor, and the middle class is getting poorer, that 1 percent economic growth must be benefiting somebody else — the fortunate few.

Economic growth for whom?

The rich don’t participate in surveys, but ever since 1996 Forbes magazine —an influential publication for the business leadership — has published a list of the richest individuals in the world and their assets. In that first year, Mexican nationals accounted for 15 of the world’s billionaires. Now, 18 years later, for the year 2014, there was only one more Mexican on the list.

So it’s not that there’s more Mexican billionaires. It’s that there are richer Mexican billionaires. In those same 18 years, the average fortune of that select group grew from $1.7 billion dollars to $8.9 billion dollars.

The average Mexican in the lower 20 percent is worth $80 dollars.

05-Purchasing power
Design: Animal Político

 

Four men have continued to head the list of Mexico’s richest over the last 20 years. They are Carlos Slim, Alberto Bailleres, Germán Larrea and Ricardo Salinas Pliego. They have something in common besides their wealth. All four amassed a significant part of their fortune as a result of privatization or concessions of public sector assets.

Slim is the owner of Telcel and of the main mobile telephone company in Latin America, América Móvil. His fortunes had taken off after he took control of Telmex, the Mexican telephone monopoly privatized in 1990. It opened the door to América Móvil.

Alberto Bailleres, president of Grupo Peñoles, and Germán Larrea, president of Grupo México (both mining companies), have exploited concessions granted by the government. Ricardo Salinas Pliego, president of Grupo Salinas, was able to take control of a national television network by acquiring the public television station Imevisión.

04 fortunes of the richest Mexicans grew
Design: Animal Político

 

Their paths to fortune can be considered part of what’s been called “the capture of state policy” — that is, the result of certain interest groups gaining control of the government decision-making process to receive for themselves particular benefits at the expense of society’s general interest.

Mexico has multiple and ongoing cases of this phenomenon. The previous communications law was so blatant an example that it was dubbed the Televisa Law, after the top national network that it benefited.

For Benjamin Cokelet, director of the Project on Organizing, Development, Education and Research (PODER), the huge business fortunes are the clearest indicator of today’s inequality in Mexico.

Of the 46 members of the Mexican Business Council, 37 control almost 40 percent of Mexico’s GDP, and much of the time that strength is a result of government awards. The privilege that the state gives to small groups helps neither economic growth nor wealth redistribution, according to Cokelet. Even pro-market financial organizations deplore the practice.

In 2012, the OECD concluded that between 2005 and 2009, monopolistic behavior on the part of Slim’s telecommunications companies was responsible for the loss of more than $129 billion dollars for the rest of the Mexican people, a loss equivalent to 1.8 percent of the GDP per year.

Policy capture and inequality, says Esquivel, the Harvard economics professor, have created exclusive growth that “has done everything but reduce poverty.”

The urban metaphor for today’s Mexican economy is Santa Fe. The financial and commercial district was built over an old trash dump surrounded by poor neighborhoods of scavengers and garbage workers. Now Santa Fe, with its gleaming skyscrapers, projects a vibrant, modern image of Mexico. It’s a city apart, one that hides in its concrete canyons the lowest workers on the pay scale.

María the toilet cleaner is one of them, living just three kilometers from her job in a room smaller than the bathroom she washes.

From the 15th floor, where Jazmine works at the advertising agency, the holes where María and the humblest workers in the corporation live are barely visible. From the office of her 80,000-pesos-per-month boss, those roofs look especially far away.

Has she ever looked down in that direction?

“No,” she says, without turning around. “It gives me vertigo.”

— with reporting and research by Majo Siscar and graphics by Yosune Chamizo

Opinion & Analysis