Labor Productivity and Economic Recovery Stumbles with Omicron
It causes an increase in input prices, hinders the flow of production of goods and services. The fourth wave of infections should not be taken lightly. The Mexican economy will grow at a slower rate than in 2021, according to CEMPE estimates.
The various affectations to daily life, derived from the wave of contagions by the omicron variant, emanate from the economic situation deepened by the scarcity of labor force due to absence from work, considered the coordinator of the Center for Modeling and Economic Forecasts (CEMPE) of the Faculty of Economics of the UNAM, Eduardo Loría Díaz de Guzmán. The university specialist warned that due to contagions, 1.5 to two million work incapacities could be generated in Mexico.
"This could have important productive effects, and effects on public spending, because such a large number of incapacities could translate into additional IMSS expenditures, and also hinder the normal flow of production of goods and services throughout the economy, which could, in turn, put more pressure on inflation".
When we talk about incapacities, we are referring to the population that gets sick and will be sick for one or two weeks. And although the mortality and case fatality rates are down compared to the same period last year, more people are taking time off work. Supply chains, moreover, will continue to be affected worldwide, not only in our country, "so this fourth wave of infections should not be taken lightly."
"We are facing this variant with very high inflation rates, of around 7.4 percent which was how we closed the previous year, this makes us think that inflation could remain high, at levels of seven, even six percent this January, and February, and from March onwards it would begin to fall", he indicated.
Growth and other consequences
Given this scenario, according to estimates made by CEMPE, directed by the head of the Applied Econometrics Specialty Program at UNAM, the Mexican economy will grow at a slower rate than in 2021.
Last year it closed between 5.5 and 5.7 percent and in 2022 we would be growing between 2 and 2.5, not only because of the economic crisis -because the government is doing everything possible not to suspend activities, to maintain green traffic lights, and even to change now the way of measuring the intensity of the disease-, but together with other factors.
Among these causes is that the Mexican economy lacks its engines of addition and depends centrally on the U.S. dynamics, which would return in 2022 to its long-term growth trajectory.
For example, inflation is a consequence of populist measures in the United States, which began to widely support all workers with paychecks, so there began to be a great shortage of labor force, especially for the most demanding jobs, such as ship containers and chip production.
This caused that only consumption was stimulated and not production; it is a classic case of inflation generation, which impacts Mexico. On the subject of unemployment in Mexico, there is no crisis, since the unemployment rate is approximately four percent, lower than in the United States, Europe, and other Latin American nations. However, in the Mexican case, the problem is the precariousness of the jobs; that is, they require several hours and are in intense conditions, but with low salaries, without benefits.
"It is not a high unemployment figure, but a high rate in critical conditions of occupation, which represents about 25 percent; that is, out of 100 workers in formal jobs or informality, 25 do so in critical conditions of occupation, work more than 48 hours and earn about two minimum wages," he concluded.