Labor policy in Mexico and the USMCA

USMCA Forward 2024 | Chapter 3

Factory workers walk in a line
Editor's note:

This chapter is part of USMCA Forward 2024.

The United States-Mexico-Canada Agreement (USMCA) is not only about trade, cooperation on regulation, and investment. The USMCA is also an acknowledgment of a political responsibility to their respective governed populations that extends beyond the economic and commercial spheres to include socio-cultural issues. Over three years since the entry into force of the USMCA, this paper analyzes the effects of USMCA on labor relations in Mexico.

Mexico, its labor policy, and the USMCA

Mexico is currently going through a period of social transformation, and the labor relations sector is no exception. Building on the 2017 Constitutional Reform, President Andrés Manuel López Obrador’s Administration passed the Labor Reform of May 1, 2019, the most significant reform of Mexico’s labor relations in the last hundred years, creating a New Labor Model. Furthermore, in 2018, the Mexican government ratified the Convention on Freedom of Association and Protection of the Right to Organize (Convention 98) of the International Labour Organization (ILO).

The labor policy priorities of the Mexican government are as follows: a) employment promotion; b) salary recovery; c) “Programa Jóvenes Construyendo el Futuro” (Youth Building the Future Program); d) elimination of outsourcing; e) restoration of profit-sharing rights; and f) the New Labor Model.

Improvement in the outcomes for Mexican labor can already be seen. For example, formal employment has continued to grow and is at historical highs, surpassing 26 million not including workers in the service of the state and federal government. Furthermore, real wages have increased by 17.7% (from October 2018 to October 2023). In addition, the current minimum wage has seen a real increase of 85% nationally and 178.9% in the border zone among companies that export (from 2018 to 2023). All these factors have reduced the number of people in poverty by 23.7%.

In 2019, the Mexican government implemented the Youth Building the Future Program, aimed at incorporating young people aged 18 to 29, who are neither studying nor employed, into economic and productive activities in workplaces and companies willing to provide them with on-the-job training. The youth participants receive a monthly stipend and social security. The program has benefited 2.7 million young individuals with the involvement of 223,928 workplaces.

The Mexican administration has also moved to prohibit outsourcing. While outsourcing in Mexico was justified as a necessity to enhance the competitiveness of companies in a global economy, it created precarious employment conditions, a lack of stable working conditions, and lower wages. Moreover, outsourcing allowed companies to avoid the fiscal obligations related to formal employment, including the requirement to contribute to social security.

In April 2021, the Mexican government banned outsourcing, positively impacting three million workers. This measure has resulted in a 27% increase in the average salary of the workers who were rehired in the company. The ban on outsourcing also led to a 144% increase in the amount of workers’ participation in profits, representing the involvement of 90% more companies compared to 2020.

The New Labor Model has led to a change in the administration of labor justice, guarantee of trade union freedom, and the right of workers to authentic collective bargaining.

The New Labor Model has led to a change in the administration of labor justice, guarantee of trade union freedom, and the right of workers to authentic collective bargaining. This includes a New Labor Justice System that incorporates the use of Alternative Dispute Resolution Mechanisms, which requires the exhaustion of conciliation before proceeding with a judicial process. When labor disputes proceed to court, proceedings are before impartial Labor Courts that aim for swift and expedited trials. This reformed process for resolving labor disputes has been key as the previous legal mechanism for settling labor disputes using the Conciliation and Arbitration Boards was unable to resolve disputes in a timely and impartial manner that adequately took into account the interests of workers.

Moreover, the Mexican administration is committed to protecting union freedom and democracy, and has guaranteed that workers can participate in the decision-making of their union. On the other hand, it also guarantees that workers are consulted on the election of their directors and the approval of their collective contracts. These reforms fulfill a constitutional mandate to ensure the representativeness of union organizations and to provide certainty to the procedures for signing, registering, and depositing collective contracts.

The Federal Center for Conciliation and Labor Registration (FCCLR) is a key institution of the Labor Reform, that began operations in 2020. The FCCLR is a public and autonomous body of labor conciliation in federal matters, and is responsible for maintaining the National Labor Registry which registers and publicizes all union contracts, legal contracts, and internal work regulations. The FCCLR is also responsible for verifying and monitoring the democratic procedures of unions. This organization also assumes the tasks of more than one hundred Conciliation and Arbitration Boards, standardizes various criteria, and has developed an improved interface that provides certainty, professionalism, and impartiality to collective contracting procedures.

Chapter 23 of the USMCA reflects many of the key elements of Mexico’s New Labor Model. This includes obligations on the government to provide collective rights and to comply with the fundamental conventions of the ILO (1998-2008). Chapter 23 requires signatory parties to recognize the importance of labor organizations and respect trade union freedom and democracy and their right to strike and collective bargaining. Additionally, the chapter requires that trade be conducted consistently with these rights. This is an unprecedented chapter that deals with labor provisions, incorporating a new generation of monitoring mechanisms. The USMCA chapter has strengthened the domestic labor reforms outlined above, the result being that Mexican workers have significant new labor rights, including access to democratic processes of participation in the decision-making of their union through personal, free, direct, and secret voting, as well as the right to approve or reject their collective contracts and contractual reviews.

Another important part of the implementation of the Labor Reform has been developing procedures for legitimation of collective contracts. Under the Labor Reform, only those collective contracts that were produced consistently with the law and rights of workers to participate in free and democratic unions were considered legitimated. The result is that only 30,526 of the 139,000 contracts reported by the Labor Boards were considered legitimate. Also, over one hundred thousand collective contracts have been left without effect. This now creates an opportunity, and at the same time an enormous challenge for the workers who were left without the coverage of a Collective Bargaining Contract, to either form a new union or join an existing one and to demand the signing of a new Collective Bargaining Contract.

A substantial and innovative update in USMCA is the new methods of monitoring and dispute resolution–the Rapid Response Mechanism (RRM). The RRM is the strictest and most binding tool for enforcing labor rights ever included in a trade agreement. The RRM allows the U.S. and Canadian governments to raise concerns about compliance with the labor rights in the USMCA. The United States and Canadian governments can use the RRM to request the Mexican government to initiate investigations to determine if workers were denied of freedom of association and collective bargaining rights.

As of November 2023, 18 complaints have been filed through this mechanism, of which only one is before a panel, three are under review by the Mexican government, and fourteen have been successfully concluded. In other words, out of the fifteen complaints accepted by the Mexican government, 93% had a quick, effective, and expeditious resolution.

The 18 complaints focused on denials of freedom and trade union democratic rights including: a) workers formed new trade unions to demand the signing of a new Collective Agreement, as the previous Collective Agreement had been rejected, derived from a Legitimation Procedure; b) improperly signing Collective Contracts with a union that did not have the majority support of the workers; c) existence of acts of intimidation, discrimination, and violence towards workers due to their union membership; d) employer interference; and e) refusal of union membership.


From our perspective, the USMCA labor chapter and the structural changes and transformation experienced since the 2019 Labor Reform have strengthened the individual and collective rights of workers, also leading to salary increases, especially with the collective contracts that went through the legitimation procedures.

Today, labor conflicts are increasingly being resolved through dialogue and alternative dispute resolution mechanisms. Indeed, 69% of cases are resolved through conciliation, of which 82% are resolved in the first hearing, that is, without the need to go to trial, and around 148,000 agreements have been signed in this pre-judicial instance. All the above have been resolved in less than 45 days, which means that access times to labor justice have been reduced by 87%, which is why it is worth highlighting the transformation in access to labor justice that the Federal Conciliation Center and Labor Registry has allowed.

While it is true that USMCA is an innovative approach to addressing labor rights issues in Mexico, it is also the case that these USMCA commitments are consistent with Mexico’s domestic Labor Reform and have in fact acted to support the administration’s goals with respect to improving labor rights and increasing wages.

Going forward, it remains of utmost importance that the Mexican government continues to consolidate the New Labor Model, its labor institutions, and the labor governance interface with workers because this means energizing labor relations and therefore contributing to greater overall growth in the region.

USMCA promotes a new way of understanding the region where formal relations are not exclusive to the states but involve businesses, civil society, and, in general, all stakeholders in the world of work. From my perspective the RRM has been successful in defending the rights of freedom and trade union democracy thanks to the legal framework, the proper appropriation of the labor governance interface, the capacity for organization and association, and the political will of the various actors in the world of labor involved.

It is imperative to fulfill the eighth goal of the U.N.’s 2030 Agenda for Sustainable Development, which focuses on Decent Work and Economic Growth. The concept of decent work encompasses various aspects of work activity, such as fair and adequate compensation, safety in the workplace, gender equity, job stability, and the duration of the workday. Consequently, dignified labor conditions must ensure the respect of all these elements and adhere rigorously to the fundamental principles of labor law.

Finally, the Mexican Government is taking significant steps towards promoting respect for labor conditions by addressing the issue of gender equality. Gender equality poses intrinsic challenges in the labor market, proving particularly complex to address in the realm of work and even more so in labor union participation and leadership. Evidently, gender equity clashes with historically masculine values, behaviors, and attitudes deeply entrenched in the labor market and national labor union life. However, thanks to the Labor Reform which incorporates a gender perspective, spaces have been created where women workers are heard and have gained an increasing presence in decision making and union leadership. This progress would drive our society towards an environment where all workers have access to a decent job.


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Bolaños, A. (2016, noviembre). El outsourcing en México: Pasado, presente y ¿futuro? Puntos Finos, 62-69.

Covarrubias, A. (2021). El T-MEC y la tercera generación de arreglos laborales. Los escenarios probables para el trabajo y la industria regional. Norteamérica, Revista Académica del CISAN-UNAM, 16(1), 254–280.

Martínez-Licerio, K. A., Marroquín-Arreola J., & Ríos-Bolívar, H. (2019). Precarización laboral y pobreza en México. Análisis Económico, 34(86), 113-131.

Vargas, E., & Pérez, S. P. (2020). El trabajo precario y el trabajo decente: su impacto en la salud y en el desarrollo sostenible. Revista Interamericana de Psicología Ocupacional, 38(2), 138-147.


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