The Labor Content Value of the Mexico–U.S.–Canada Agreement (USMCA) works in favor of the United States, the U.S. Congress concluded in a report.
President Joe Biden’s administration was the first to use USMCA’s Rapid Response Mechanism to raise wages in the United States.
In this regard, the Joint Economic Committee of the U.S. Congress concluded that strict enforcement of the USMCA labor provisions will ensure that companies “can no longer exploit workers in Mexico” to save on labor costs.
Labor Content Value
As a result of this change in enforcement, the document adds, companies will have less incentive to cut jobs and wages in U.S. manufacturing and ship jobs out of the country.
The USMCA establishes a 40% Labor Content Value for automobiles. That is, 40% of the value of the vehicle must be produced using wages at least $16 per hour.
“This requirement incentivizes investment in new vehicles and parts in the United States, supports good-paying jobs, and helps ensure that U.S. workers and producers can compete on a level playing field,” noted the White House Trade Representation (USTR) in another report.
In parallel, the U.S. government has taken steps to raise wages and protect workers.
Under President Biden, the U.S. Department of Labor is helping to ensure that more than 11 million U.S. workers get the wages they deserve by improving guidelines on when employers can apply tips to comply with minimum wage laws.
This action reverses Trump administration policies that made it easier to underpay certain employees.
Also, the Biden administration implemented a $15 minimum wage for federal contractors, up from the previous floor of $10.95. This increase will impact more than 300,000 workers and help many more.
In addition, raising the minimum wage for federal contractors will boost the wages of those who do not work for federal contractors by increasing competition for talent.
Employers competing with federal contractors for workers will face pressure to also raise wages to meet hiring needs, spurring broader wage increases.