Mexican Labor 20% Cheaper Than in China

Commentary by Doug Donahue

This Financial Times Beyond Brics blog post points out that labor rates in Mexico are as much as 20% lower than in China, according to a Bank of America Merrill Lynch economist. It’s well documented that hourly wages for production workers in China are rising fast. At the same time, in Mexico:

1) wages at the lower end of the payscale are rising faster than inflation and

2) the Peso/US Dollar exchange has been relatively unchanged of late.

This results in greater stability for foreign manufacturers than China could match.

What this FT blog post doesn’t mention, however, is equally interesting.

Mexico’s On-the-job Growth Opportunities

Entry-level workers in Mexico’s maquiladora industry can potentially advance their career rapidly due to myriad learning and training opportunities available. An indirect worker who joins a company at entry level and wants to grow has the potential to benefit from new technologies, production processes and training programs in the course of his or her job. That’s because such a worker will be cross-trained on multiple different processes and learn new skills that allow them to advance rapidly.

While this FT blog post points to stagnant wage growth in Mexico, I would clarify that such stagnancy is due to an excess of indirect labor in Mexico at the entry level – resulting in little wage movement there. But if you look at the level of opportunity that foreign-based manufacturers present to both indirect and direct workers in Mexico, you’ll see that motivated people have plenty of possibilities to advance their career.

Source: Financial Times

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