New collective bargaining negotiations drive higher wage increases

The automotive sector has registered this year, for example, salary increases of between 7% and 9% in companies such as Nissan, GM and Volkswagen; among the factors that have favored these increases, the active participation of labor judges stands out.

Note published on August 24 in El Economista, Empresas [Companies] Section by María del Pilar Martínez.



“After the labor reform, the dynamics are completely different from the way in which the company and the union used to sit down to negotiate the yearly salary increase.”

After the implementation of the labor reform, a new reality is being lived in Mexico in collective bargaining, with more “complex and sophisticated” processes that result in higher salary increases and “maintaining the profitability of companies” is becoming quite a challenge. “Welcome to the new labor model.”

After the negotiation of the salary increase at the Volkswagen de México company, Óscar de la Vega, who was in charge of this process, stated that the dynamics are completely different from the manner in which the company and the union used to sit down to negotiate the annual salary increase.

After noting that the automotive sector reports the highest salary increases which, in the case of Volkswagen, was of 8.1% directly to salary and .5 in benefits, he explained that the new reality starts with the judges, it is a different dynamic.

“Judges maintain two very important principles that make a change: the first one is called ‘Principle of Reality’, which consists on knowing exactly what the situation of the company is, the economic situation, the financial situation; this detonates an additional element and complicates the negotiation processes because the judge now has input to provide during this process”, he said.

In second place, De la Vega added, there is the “Topic of Immediacy”, which refers to the active participation of the judges in the negotiation processes, at the same time in which the legal process is in progress; therefore, “these processes have become very complex.”

In the automotive sector, the salary increases that have been registered this year are, for example, Nissan at 9%, General Motors around 7% and Volkswagen with 8.1% , “which is setting precedents of where the industry is headed.”

Pressure on salaries

In addition to the above, the lawyer from De la Vega & Martínez Rojas explained that the automotive sector, representative because it is a high exportation sector, is experiencing an important phenomenon that has an impact on salaries as there is a shortage of workers.

“It is becoming increasingly difficult to find experienced bilingual technicians or engineers; this, undoubtedly, is an effect, fortunately, of nearshoring and, therefore, there is a significant demand for people and adding this to the increases to the minimum wage, the way in which this has pushed salary levels, there is, automatically, a very strong pressure to elevate salary increases in each negotiation”, he explained.

Additionally, now that unions are democratic, “they have to report the result of the negotiation to the base, and this adds a particular condiment to the pressure that exists for raising collective bargaining negotiations, as it is no longer just the voice of the leader, or the signature of the leader, but requires [consultation], in this case there was no consultation in regard to salaries, but it is still an important precedent because in the integral revision that we will have next year we will have to conduct a consultation and it is important to have the endorsement of the workers.”

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