A few decades ago, the US looked up to China in an effort to benefit from their lower labor expenses, to enhance their overall profit. But, since then, there has been a considerable decline in Mexico’s labor cost leading to continuous profitability for the companies that decide to re-shore to the south.
Difference between China and Mexican labor costs
Three decades ago, the cost of Mexico labors was approx. thrice higher than China. Even after the high transportation costs of production in Asia, US producers found it beneficial to go offshore and exploit the low-cost benefits.
But with time, things changed. While the production slowed, the unit labour rates of China rose. The difference between Yuan and Dollar also played a major role in this. Meanwhile, Mexican productivity increased, and its labor costs declined. This led to a steady loss of the Chinese workforce to Mexico for technology, electronics and automotive manufacturing.
The appealing low labor rates in Mexico become more appealing to US manufacturers when teamed with their productivity and the proximity of Mexico to the United States. This leads to a consistent trend of US manufacturers shifting their operations to Mexico. More and more companies continue to relocate their world and take advantage of low Mexican labor rates.
According to the latest field studies, the US average completely loaded labor costs for general manufacturing functions differ from $21 per hour to $38 per hour. We mean wages, social security, workman’s compensation, state and federal unemployment insurance, medical insurance, and more by completely loaded labor costs. It would be great to see that Mexico’s completely loaded labor rates are around $4 per hour. This difference has garnered the attention of the US manufacturers who need labour-intensive services.
Labor rates in Mexico Manufacturing Sector
A major benefit of driving manufacturing companies to invest in manufacturing in Mexico is the competitive labor rates for skilled employees. However, like in any place, the Mexico labor rates range depends on the kind of work done and the specific area where the manufacturing units are sited. Pay rates also vary depending on the technical abilities needed of an employee. However, what really makes the competitive pay in Mexico unique from the other nations is that it often includes top quality services from a trained labor force. As manufacturing is prevalent in the industrial sectors across several Mexican areas, several training institutions prepare workers for job positions.
Before choosing the location to set up your manufacturing unit, you must know what you will be demanded to pay.
Hourly wages in Mexico
The Mexico labor rates are controlled by the Mexican Federal Law. It is based on the daily rate of pay which is used to calculate their rates, severance pay, overtime rates and more. The daily rate doesn’t include taxes and social benefits, though they are added to aggregate compensation costs.
It is typical for employees to know their total wages if they are unaware of their daily rates. Understanding this will help them demand better competitive rates from potential recruits.