MEXICO CITY (AP) — Most Mexicans agree the country's dysfunctional, 1970s-era labor laws need to be retooled. What they don't agree on is how, with a proposal to loosen work rules and increase union democracy threatening to create the first big political battle for President-elect Enrique Pena Nieto.

Advocates say the reform, which will allow part-time work, hourly wages and outsourcing, will help Mexico create the million new jobs per year it needs for young people and migrants returning from the United States. It is backed by both President Felipe Calderon, who submitted it to Congress this month, and Pena Nieto, who takes office on Dec. 1.

Opponents say low wages in several industries already make Mexico's labor force more attractive — compared to increasingly affluent countries like China — and the last thing Mexican workers need is a reform that would pare the meager benefits and job security they currently enjoy.

"Yes, we need a reform that allows labor productivity to increase, but not at the cost of workers' rights," said Jesus Zambrano, leader of the leftist Democratic Revolution party, which has vowed to oppose the bill, in the streets if necessary.

The problem is pressing: The country's 5.4 percent unemployment rate is probably a huge understatement, given the lack of unemployment insurance and the fact that jobless workers quickly slip into Mexico's vast, unregistered army of street vendors and day laborers. Officials say the lack of jobs is one reason why so many youths are drawn to Mexico's violent drug cartels.

Under Mexico's labor laws, workers earn as little as 60 pesos ($5) per day but still pay dues to pro-company "paper" unions they never see. About one-fifth of salaried workers in Mexico are unionized.

Bosses, meanwhile, complain that expensive severance and benefits packages, along with strict work and seniority rules, make it hard to create new jobs.

Added to that is a lengthy and arcane dispute resolution process that can hold up back-pay or severance cases for a decade.

Experts say loosening work and seniority rules to let employees perform different tasks and gain promotions based on ability would increase productivity.

In August, Organization for Economic Co-operation and Development Secretary General Angel Gurria said that labor reform, together with tax and other changes, could boost Mexico's GDP growth by 1 percentage point per year.

Everybody, even Zambrano, agrees that the proposal has some good points, such as secret ballots and external audits for notoriously corrupt and autocratic unions.

But given the odd alliances prevailing in Mexican politics, many fear the new proposal will actually decrease democracy in its unions.

Pena Nieto said recently at a meeting of business leaders in Chile that the reform will "allow Mexico to have greater flexibility in its labor market, make hiring easier, without this necessarily meaning a step backward in labor rights."

But Pena Nieto's Institutional Revolutionary Party, or PRI, which constitutes the largest voting bloc in Congress, has for decades been supported by and protected the most antiquated, old-guard union groups in a system known as "corporativism."

Mexican unions are, at present, so undemocratic that, when opening new plants, employers will sometimes select a docile union for the new facility, and the first workers will enter with a labor contract already signed behind their backs. Many unions have had the same leaders for decades.

While supporting the proposal, Pena Nieto seems loath to anger key supporters by approving the union transparency rules.

"I'm afraid that the PRI is going to defend the corporativist unions," said Carlos de Buen, a prominent labor lawyer.

And perversely, the new framework would actually make it much harder for upstart, democratic unions to challenge the old-guard "paper" unions. New rules would require such challenger unions to report the names of at least one-third of workers at a plant who support it — names that would be seen by the employer's representative on local labor boards. Continued...