Globalization and Regional Development Models

The comparison of the labor markets of Puebla and Baja California⁵ makes sense if we consider that both territories have been affected by the globalization process that has been underway for several decades, but with different expressions. If we take as a guiding principle the industrialization process that presents itself in Mexico with the relocation of foreign companies and the trade openness of the economy of the country, it is possible to situate each of the two regions in different points of the trajectory taken by this process. Baja California, being a border state, is part of what María Eugenia ^{De la O (2006)} called the maquila historical border, since it was in the states bordering the United States where, in the mid-1970s, the installation of the first maquila companies took place. Meanwhile, the state of Puebla is part of the third emerging axis of the maquila, manifesting in the 1990s when hundreds of factories were established for exports of Mexican, American, and Korean origin, in the Sierra Mixteca, Sierra Norte, and the Valley of Tehuacán. The textile and clothing industry was the productive branch that reached cities and rural areas of the state of Puebla. In Tehuacán, factories were mainly set up to produce jeans for export, with brands such as Navarra, Tommy Hilfiger, Polo Ralph Laurent, Dockers, Guess, among others (^{De la O, 2006}). On the other hand, the automotive industry, which has been long-standing in the state of Puebla due to the presence of Volkswagen, which has been present since 1964, has since the 1990s gone through a productive restructuration process in response to the demands of economic openness and the competition in the world market. In recent years, the automotive industry has strengthened in this region due to the arrival of new assembly plants, as is the case of Audi.

As part of the historical maquila region, the state of Baja California has been one of the geographical areas with greater dynamism by the maquila industry, whose main characteristic has been heterogeneity (regarding sector of activity, company size, and production organization). Although the companies that predominate in said entity are of American origin, since the 1990s those of Asian origin (such as Sony, Sanyo, and Sharp) have gained a considerable presence. At the same time, a certain productive specialization took place due to the predominance of television assembly companies.

Thus, the comparison of the labor markets of these entities makes sense showing the different moments in which their economies have been impacted by the industrial relocation of foreign companies in Mexico, with this being one of the most important economic processes of globalization. Now, this industrialization goes hand in hand with the regional development models, which differentiate the northeast region of Mexico from the central region, to which the state of Puebla belongs.

In the middle of the last century, the productive activity in Baja California concentrated in the agro-industrial production of the Valley of Mexicali, with the production of cotton standing out, while Tijuana-the city with the greatest number of inhabitants in the state-had a commercial and tourist vocation. Since then, the local economy of the urban centers of Baja California have found themselves strongly linked to the border dynamic concerning the flow of people and merchandise, for which it has historically become a cross-border region, where jobs in San Diego county, even including the city of Los Ángeles, are part of the employment options for thousands of people who cross the border daily to work. On the other hand, in the 1990s the Valley of San Quintín, to the south of the state, begins to develop as an area of agro-industrial activity for export.

Meanwhile the state of Puebla, being part of central Mexico, is linked to the industrialization dynamics of the import substitution period, and the textile industry was one of the most important developed in said territory. Besides, agricultural activity has played an important role, since a significant portion of the population live in rural locations and is comprised mainly by indigenous communities: Mixtec, Nahuas, Mazatec, Popolac, Totonac, and Otomi. Similarly, the automotive industry, with the Volkswagen plant, has represented a particularly important pole of growth, especially for the capital city of the state.

As for participation in the national economic activity, both entities have had a similar participation of around 3% in the last decade on the Gross Domestic Product (GDP). In the last five years, Puebla has slightly increased its participation and Baja California had a downward trend, so that the growth rate of the GDP for both entities, in 2014, was lower than the observed average at the national level (^{Inegi, n.d.})

Observing the GDP by sector of activity, we can say that the activity of the primary sector is more important in Puebla: between 2003 and 2014, its participation in the state GDP remained at around 5%, slightly above of what occurs at the national level, which is of 3%. On the other hand, Baja California maintains this participation at 3%. Whereas a low tendency can be observed in the secondary sector: for Baja California (from 2003 to 2014) there is a drop from 38% to 36%; while in Puebla, the drop is from 36% to 33%. In the relative importance of the industrial activity, these drops could be due to the economic crisis and its contractive effect on the activities of the export industry in both regions (^{Inegi, n.d.}).

Highlighting the behavior of the tertiary sector throughout this period, there is a two percent increase for both economies, representing a little more than two thirds of the state GDP. In brief, there are economic structures with certain similarities regarding the weight of the productive sectors, although it is observed that agricultural activity is more important in Puebla and the secondary sector in Baja California.

Figures 1 and 2 show the territorial division of the states into municipalities, with Puebla not only having the greater expanse but also a more pronounced sub-regional diversity. The economic structure of Puebla is more heterogeneous and has greater dispersion in the territory, which is divided into 217 municipalities and seven economic regions. In contrast, Baja California is divided into five municipalities. Additionally, the degree of urbanization⁶ in 2010 was of 72% in Puebla and of 92% in Baja California, that is, the economic activities have a more urban nature in the latter (calculations done by the authors based on ^{Inegi, 2010}).

Source: ^{Inegi (2014a)}.

Figure 1: Municipalities of Baja California 

Source: ^{Inegi (2014b)}.

Figure 2: Municipalities of Puebla 

In order to better present the context in which this comparison is done, it is also necessary to measure the impact that the 2001 and 2008 economic crises had at the national and regional levels. The 2001 crisis particularly affected the productive activity of the maquila companies, in which both the strengthening of China as a place for industrial relocation and as a supplier for the American market were combined, as well as the changes in some NAFTA agreements, which modified the advantages Mexico had for the operation of foreign companies. Subsequently, in 2008, the United States economy contracted due to the effect of financial maladjustments, which due to its magnitude and dependence on the Mexican economy, caused a contraction of the annual GDP growth of 5.95% based on 2003 prices (^{Aguirre, 2016}).

According to ^{Ruiz and Ordaz (2011)}, the Mexican economy has not generated the sufficient number of jobs (between one and 1.2 million per year) required by the annual increase of the economically active population (EAP), thus it has a significant job deficit. The abovementioned is reflected in the unemployment rates, which amount between 3% and 5% of the EAP in recent years. The authors also note the convergence of formal and informal employment, given the growing number of low-quality jobs that lack social benefits and more informal jobs. That is, we are facing a generalized landscape of work precariousness, as also indicated by ^{Mora and De Oliveira (2010)}.

Population process

In 2010, Puebla had almost double the population of Baja California, with 5 779 829 and 3 155 070 inhabitants, respectively. The distribution of the population by age shows that Puebla has a slightly greater percentage of people under the age of fifteen (31% vs. 29%), with young people (between 15 and 29 years) representing 27% in both states, and adults representing 43% in Baja California and 41% in Puebla⁷ (^{Inegi, 2010}).

One of the characteristics that distinguishes these two regions as border and non-border, relates to the population processes. This is due to the fact that border regions to the north of Mexico have been populated by the arrival of people from other states of the country, whereas the population of Puebla, as a non-border region, is mainly comprised of people born in the state (90%), as can be observed in Table 1. In contrast, people born in the state of Baja California represent only half the population of the state.

Changes in this social growth dynamic have been observed in the last decade, which can be confirmed if we observe recent migration behavior, that is, those people who moved to the state in the five years prior to the census. Table 1 shows that this percentage of the population decreased from 12.8% to 7.5% in Baja California, while it remained at around 3% in the case of Puebla. This is a significant change in the population process of Baja California since, being part of the effects of the 2001 and 2008 crises, as well as the closing of the border, it stopped being a pole of attraction for migrants and reduced its role as a transit point for people going to the United States, with the consequent decrease of the social growth of the population: the net migration rate went from 13.2% in the 1995-2000 period to 1.6% in the following 2005-2010 period (^{Cruz, Silva & Navarro, 2015; p. 181}). In the case of Puebla, the net migration rates⁸ have been low and do not present significant changes in this period; it was negative (-0.8%) in 1995-2000, then positive (0.2%) in 2000-2005, and then negative again (-0.2%) in 2005-2010, meaning it has been a moderate population-expelling state (^{Cruz et al., 2015, p. 181}).

In recent decades, we have observed other processes also linked to the contraction of economic growth and to the immigration policy of the United States, representing the significant (willful or forced-i.e., deported) return of Mexicans from said country.

Dynamic and Composition

During the last decade of this century, the employment growth dynamic has been low as consequence of the 2001 and 2008 economic crises. There have been unprecedented unemployment rates in Baja California (for the last quarter of the year the rates were of 6.69% in 2009, 6.79% in 2011, 5.1% in 2013, and 3.74% in 2015). It had for a long time been considered a place of opportunity due to its low unemployment rates, which remained below 2.5% (^{Inegi, 2011a}) before 2007. To a large extent, the loss of jobs was due to the contraction in the job demand of the export maquila companies.

In contrast, the unemployment levels in Puebla were less dramatic than those in Baja California, although they peaked in 2011 and have lowered significantly in recent years with values of 3.6% in 2009, 4.8% in 2011, 3.76% in 2013 and 3.03% in 2015 (Inegi, 2011b; 2016a), showing its lower dependence on the exterior.

The composition of the labor markets according to immigration status (locals, non-recent immigrants, and recent immigrants) corresponds to the characteristics described in the above section. Thus, the employed population of both states is distributed in the indicated categories as follows: 88% of locals in Puebla remained in 2000 and 2010; in Baja California this increased slightly from 40% to 42%. The most relevant data in Table 2 is the decrease in the percentage of recent immigrants of the employed population, which went from 15% in 2000 to 8% in 2010.

The incorporation of women to paid work from 2001 to 2010 has been more intensive in Baja California, which reflects in a greater ratio of women as part of the employed population, widening the percentage difference between both states to 5% in 2010, when women represented 37% of the employed population in Baja California and 32% in Puebla (Table 3).

Structure of the Labor Markets

The description of the structure of the labor markets refers to the distribution of jobs according to the form of absorption of the workforce, that is, to the salaried levels of the employed population. A structural heterogeneity that is expressed differently in the border and non-border regions remains in Mexico, resulting also in a heterogeneous employment structure. In the border regions to the north of Mexico, a greater salaried workforce is observed with the consequent formalization of the work relations and greater access to social benefits. On the other hand, in the central regions of the country, as is the case of Puebla, the formalization of the work relations is less extended, and productive forms that could be denominated as atypical persist, in which a greater presence of the indigenous population in rural localities are observed.

Table 4 shows the distribution of the employed EAP for the first half-year of 2016 according to the following categories: independent workers (employers and self-employed), subordinate workers (subordinate and remunerated workers, salaried workers, and non-salaried workers), and unpaid workers (unpaid family members and unpaid non-family members). In parallel, the employed population is classified by gender and state.

The distribution expresses the indicated differences concerning the persistence of independent work (employers and self-employed) in the state of Puebla, for both men and women, even though the most notable difference is in the percentage of non-salaried men. Another indicator of lower salaried work and the persistence of traditional forms of production is the relative importance of unpaid work in Puebla, particularly among women (13%); this fact relates to the importance of agricultural activities and the tradition of women working as unpaid family members. This situation is reflected in the proportion of women employed in the primary sector in Puebla, which reaches 9%, while it is only 5% in Baja California (^{Inegi, 2016a}).

The differences in the proportion of subordinate workers confirm that salaried and paid work is more widespread in Baja California, the proportion of which is 10% above that of Puebla, and it is more evident among women. This distribution indicates a greater advance in the incorporation of women to salaried work in Baja California and of greater balance in the participation of men and women in the labor markets. The percentage of employed women in the secondary sector in Baja California for the first quarter of 2016 is of 27%; 16% in the case of Puebla. However, it should be noted that the participation of women in remunerated work does not necessarily signify lower inequality between men and women. Another indicator of the presence of women in possibly non-salaried or precarious work is participation in the tertiary sector (commerce and services), which increases to 74% in Puebla and to 66% in Baja California (Table 5).

Among men, the most notable difference is the percentage employed in the primary sector, this being 30% in Puebla against 7% in Baja California. In the secondary sector, 27% of men are employed in this sector in Puebla and 35% in Baja California. In the tertiary sector (commerce and services) the percentages are 42% and 52% for Puebla and Baja California, respectively (Table 5).

In order to show the differences in the occupational structure, Figures 3a, 3b, 4a, and 4b are particularly useful as they show the economic units of each state classified according to their size (micro, small, medium, and large) and their participation in the generation of state income. The difference between states lies in the fact that the percentage of micro economic units (employing 0 to 10 people) is slightly lower for Baja California when compared to Puebla (92.1% vs. 97%, see Figure 3a and Figure 4a), with a contribution to the state GDP of 17.1% and 13.5% for Baja California and Puebla, respectively. The main productive activities of the micro units for both states are retail grocery and foodstuff and the preparation of food and drink, while raking third we have auto repairs in Baja California and bakeries and tortilla shops in Puebla (^{Inegi, 2014a}; ^2014b).

Source: ^{Inegi (2014a)}

Figure 3a: Baja California. Economic units by size and participation in the total state revenue, 2013. 

Source: Inegi (2014a).

Figure 3b: Baja California. Economic units by size and participation in the total state revenue, 2013. 

Source: ^{Inegi (2014b)}.

Figure 4a: Puebla. Economic units by size and participation in the total state revenue, 2013. 

Source: ^{Inegi (2014b)}.

Figure 4b: Puebla. Economic units by size and participation in the total state revenue, 2013. 

Small (11 to 50 people) and medium-sized (51 to 250 people) economic units represent a greater proportion in Baja California (7.4% against 2.9% in Puebla, see Figures 3a and 4a), and also contribute more to the state GDP (45.7% against 36.4%, see Figures 3b and 4b). Whereas large (more than 250 people employed) economic units only represent 0.1% in both economies but generate 37.2% and 50.1% of the state GDP for Baja California and Puebla, respectively, with car and truck manufacturing being the main economic activities in both state economies. To a lesser extent, the manufacture of non-electronic dental and ophthalmic equipment, the beverage industry, and the manufacture of audio and video equipment and electronic components stands out in Baja California, while in Puebla this is the case for the manufacture of automobile parts, wireless telecommunications, the production of petroleum and gas, chocolates, sweets, fruit preservation, and vegetables (^{Inegi, 2014a}; ^2014b).

These data indicate that there is a polarization of the production structure in Puebla, due to the importance of microunits and the participation of large companies in the state GDP. While in Baja California, small and medium economic units have a significant participation in the productive structure. Concerning economic vocation, the automotive sector in both territories is predominant, although the presence of other sectors is also notable in Baja California, such as the manufacture of electronic and medical products.

Other indicators that give account of a more heterogeneous labor market in Puebla and with lower-quality jobs are shown in Table 6. The partial employment, unemployment, and subemployment rates (understood as the need to work more hours, translating into the search for a complementary job or a new job with longer working hours) have a higher incidence in Puebla than in Baja California. The rate of critical employment conditions refers to the percentage of the employed population who are working less than 35 hours per week for labor market reasons, in addition to those who work more than 35 hours per week with monthly incomes below the minimum wage, and those who work more than 48 hours per week earning up to two minimum wages. This is the employed population who works in precarious conditions and its growth confirms the drop in the quality of the jobs. This indicator is almost three times higher in Puebla, but the increase of this rate in the last 10 years in Baja California has been very fast, going from 2.1% to 7.7% (^{Levar, 2011}).

The employment rate in the informal sector refers to the population employed in an economic unit that operates from household resources without constituting itself as a company, so that the activity does not have an identifiable and independent situation from that household. This rate increases to 31.8% and 19.9% in Puebla and Baja California, respectively, with the former being above the national level (27.1%) and the latter being below this average.

By considering a broad measure of informal employment, that is, the informal employment rate⁹, it is possible to observe a larger breach between the data corresponding to Puebla and Baja California, with respective values of 73.3% and 41.4% of the employed population.

Working Income

The working poverty trend index (ITLP for its acronym in Spanish) is an indicator developed by Coneval that serves to show how much access there is to a fair income through the working salaries. This index has two components-the salaries and the prices of the basic food basket-and it is a measure of the purchasing power of wages that shows the trend of the percentage of people who cannot acquire the food basket with the working income. Therefore, if the ITLP increases, it means that the percentage of people who cannot buy a food basket with their working income is also greater.

Figures 5 and Figure 6 show that from 2005 to 2015 the state of Baja California had a significant drop in the purchasing power of wages, by more than doubling the ITLP, from 0.65 to almost 1.6 in ten years. Meanwhile, the behavior of the ITLP for Puebla is more stable in this period, but also gives account of a deterioration in the working incomes, the ITLP fluctuating between 0.85 and 1.1 in the same period.

Source: ^{Coneval, 2016}.

Figure 5: Baja California. Working poverty trend index*, 2005-2015. 

Source: ^{Coneval, 2016}.

Figure 6: Puebla. Working poverty trend index*, 2005-2015 

These data shows that the precarious work process by the salary component is more notable in Baja California than in Puebla, due to the impact of the 2001 and 2008 economic crises and the greater dependence of the local economy with respect to the changes in the international context.

Occupational Segregation by Immigration Status and Gender

In order to analyze the segregation of the population by their immigration status and gender, the 10 main occupations of the economically active population in 2010 have been identified. Based on this information, it is observed that in terms of occupations, the non-recent and recent immigrant population present significant differences with regard to the local population in Baja California. The occupations of watchmen and guards in establishments and domestic workers stand out as part of the main job occupations of the immigrant population, as well as the occupation of construction support workers in the case of recent immigrants. The occupation of assemblers of electric and electronic parts are among the 10 main job occupations of both locals and immigrants, which indicates the importance of employment in this sector of activity in the state, which can also be interpreted from the occupation of storekeeper in establishments (Table 7).

In contrast, in Puebla, occupational segregation by immigration status does not appear as evident, since there are various occupations classified as main occupations for the three categories of the population. However, the occupational category of street vendors of miscellaneous items (excluding food sales) seems to concentrate in the immigrant population. In the case of recent immigrants, they often are employed as watchmen and guards in establishments or in the production of bread, tortilla, pastries, and other cereal and flour products. For this state, it stands out that of the 10 most important job occupations for the local population, three are associated with the agricultural sector and the main one is that of workers in the cultivation of maize and/or beans (Table 8). Although the difference between the indigenous and non-indigenous population has not been considered, it is very likely that a segregation by ethnicity would be expressed in job occupations. Similarly, there are various main occupations that are independent from the immigration status, that is, those that belong to the tertiary sector (in particular to commerce) and that of operators of sewing, embroidery, and cutting machines for the manufacture of textile and clothing products. These jobs are offered by maquila companies for export, particularly in the Valley of Tehuacán.

Table 9 summarizes the 10 main occupations in Baja California by gender, where it can be observed that the occupations of assemblers of electronics, domestic workers, cashiers, box office workers and debt collectors, secretaries, street vendors, industrial machine operators, or sweepers are dominated by women, while men tend to concentrate in occupations such as construction workers, masonry and the like, watchmen and guards in establishments, mechanics in the maintenance and repair of motor vehicles, as drivers and other occupations related to the industry.

In Puebla, the main occupations for women are domestic work, operators of sewing, embroidery, and cutting machines for the manufacture of textile and clothing products, secretaries, workers in the production of bread, tortilla, pastries, and other cereal and flour products, tailors and dressmakers, seamstresses and clothing makers, and street vendors of miscellaneous items (except food sales). Whereas men are employed in activities related to agricultural activity, as well as construction workers, masonry, and the like, and drivers. The occupations classified among the 10 main occupations for both genders are commerce and workers in the cultivation of maize and/or corn. Unlike Baja California, these occupations are linked to less salaried productive activities and are typical of rural localities (Table 10).

Table 11 shows some of the findings regarding the greater formalization of employment in Baja California, which translates to a greater access to health institutions, for both men and women, since the levels of access for both genders fluctuate around 50%. In the case of Puebla, the situation is quite different, both men and women have little access to health institutions and only around 20% of the employed population have this social protection.