In 2001 Mexican manufacturing wages were 4x those in China; in 2012 they're the same

[yllus]

Most of this article was focused on something other than what I've made the title of this post, but that's what I found most interesting. China isn't as cheap as it used to be, and could it be that Mexico is coming around on its own? Interesting stuff.

The Economist - The global Mexican: Mexico is open for business

...

Soaring wages in China are making Mexico more competitive. In 2001 Mexican manufacturing wages were four times those in China; now the difference is trivial. Add in the price of fuel, and it is often as cheap to make things in Monterrey and drive them across the Rio Grande as to make them in Guangdong and ship them across the Pacific. It is also faster: a Mexican lorry can be in Michigan in a couple of days. Small wonder that Nissan, Honda, GM, Coca-Cola, DuPont and Eurocopter are rushing to invest south of the border.

Mexico is unusual in that it not only has a globalised elite but also a globalised peasantry. The rich study in the United States; the poor mop floors there. Both groups benefit their homeland. The elite pick up skills and contacts at American universities, which help Mexican firms do business with their giant neighbour. Migrant mop-wielders send money home to poor Mexican villages.

The scale of border-straddling is colossal. One Mexican in ten lives in the United States—some 12m people. Add in the descendants of Mexicans born in the United States and the number is 33m. This creates a market for Mexican products: Corona is the most popular imported beer north of the border.

Mexico’s most dynamic firms tend to be cosmopolitan. Grupo Bimbo, Mexico’s biggest baker, is also America’s, having bought the North American baking arm of Sara Lee in 2011. Daniel Servitje, its Stanford-educated boss, switches easily between English and Spanish, and between home and abroad. Grupo Bimbo sells tortillas in the United States and American-style bagels in Mexico.

Mr Servitje plans to invest $1 billion in the United States in the next five years to build zippier, cheaper bakeries. He aims to consolidate a business that has long been scattered like sprinkles on a cake. He wants to gain economies of scale, and to spread good ideas from one market to another. (The firm’s Mexican truckers take a four-day course in courtesy; other road-users notice the difference. This is less urgent in other countries.)

...

Yet the greatest threat to global Mexican firms is less subtle. It is the closing of that 2,000-mile border. Thanks to drones, deportations and economic doldrums, net migration from Mexico to the United States has tumbled to roughly zero. If Mexican students and workers find it too hard to move back and forth, they will eventually stay put. Connections will grow stale, like breadcrusts. That will be bad for business, and much besides.

 

[DaveSimmons]

This is one pragmatic reason to end drug prohibition: Cut off the oxygen supply of the cartels, lessen their power in Mexico, make that country more stable.

Shift jobs from China to Mexico, and give Mexicans a reason to stay there instead of trying to cross the border.

Bringing jobs back to the US would be even better, but we do gain more from outsourcing to Mexico than we do to China.

 

[1prophet]

This is one pragmatic reason to end drug prohibition: Cut off the oxygen supply of the cartels, lessen their power in Mexico, make that country more stable.

Shift jobs from China to Mexico, and give Mexicans a reason to stay there instead of trying to cross the border.

Bringing jobs back to the US would be even better, but we do gain more from outsourcing to Mexico than we do to China.

Exactly, Mexico needs stability, the Chinese government would never put up with the things the drug-lords do in Mexico to the local authorities, they would steamroll everyone even remotely related if they did, no pun intended.

 

[Dari]

Sounds good for the Mexicans (and others) but I can't help but wonder what inflation will do to those wages. Mexico can only absorb so much. Also, what about logistics? Unless a lot of the other things needed in a logistics chain are moved as well, China will still need to be relied on.

 

[openwheel]

boy if we can ship those jobs from China to Mexico, then I will put all my money in Coke stocks. I would be set for life!!!

 

[DaveSimmons]

Also, what about logistics? Unless a lot of the other things needed in a logistics chain are moved as well, China will still need to be relied on.

That's why Apple uses the Foxconn factory towns -- one stop shopping for parts, and suppliers who will do whatever it takes to deliver them.

So yes, some companies couldn't shift everything to Mexico overnight even if the country was stable. But industries moving to China now could pick Mexico instead, and some of the less complex manufacturing now in China could be shifted as a first step.

 

[Borkil]

Exactly, Mexico needs stability, the Chinese government would never put up with the things the drug-lords do in Mexico to the local authorities, they would steamroll everyone even remotely related if they did, no pun intended.

So actually all we need to do is bring communism to Mexico.

 

[bfdd]

Uh costs are just normalizing. What's really an issue is the bullshit here in the USA acting like we deserve oh so much more money to basically do the same fucking thing they do there. Nope we don't and that's why we won't get those jobs back and that's why whine whine whine I'll never support entitlement programs when the clear solution to putting so many back to work is simply stripping back the over regulation and intervention of our Federal Government.

 

[DaveSimmons]

the clear solution to putting so many back to work is simply stripping back the over regulation and intervention of our Federal Government.

Possibly to a certain extent, but I wouldn't want to sink to China's standards of lead in your coffee and untreated industrial waste in the air, streams and groundwater.

 

[Atomic Playboy]

Uh costs are just normalizing. What's really an issue is the bullshit here in the USA acting like we deserve oh so much more money to basically do the same fucking thing they do there. Nope we don't and that's why we won't get those jobs back and that's why whine whine whine I'll never support entitlement programs when the clear solution to putting so many back to work is simply stripping back the over regulation and intervention of our Federal Government.

Clearly the answer to our problems is to set our goals to align to the expectations of a third world country. How dare we expect a better standard of living than China or Mexico?

 

[bfdd]

Clearly the answer to our problems is to set our goals to align to the expectations of a third world country. How dare we expect a better standard of living than China or Mexico?

Do people want jobs? Do they want to feed themselves? Or do they want to sit around and collect a check while those of us who do jobs that are in different industries feed and support them? It's that simple. Which sounds better to you? To me, I'd like people to work and feed themselves. BTW I have vastly different views on corporations and environmental regulations and how those kinds of law suits should pan out than what is currently legislated or law at the moment. So mind you the world in which I envision is ran much much differently than this one that has been built up around us. You know the one so many of you fight so hard to keep the facade up.

 

[StrangerGuy]

What, the new standard of economic competitiveness is based on how you can match China in wages? If you have to do that your economy suck balls, period.

 

[1prophet]

So actually all we need to do is bring communism to Mexico.

No, what you need to do is buy products made by American, European or other countries with equivalent health, safety, and labor standards and stop looking for the lowest price at the expense of everything else,

using other countries that lack enforceable, labor, environmental, and safety laws, including corrupt authorities that require bribing as well as below market labor might look good on the next quarterly report but is not good for the country in the long run.

 

[GaiaHunter]

No, what you need to do is buy products made by American, European or other countries with equivalent health, safety, and labor standards and stop looking for the lowest price at the expense of everything else,

using other countries that lack enforceable, labor, environmental, and safety laws, including corrupt authorities that require bribing as well as below market labor might look good on the next quarterly report but is not good for the country in the long run.

It will still mean you are poorer.

It doesn't matter if you earn less or have to pay more - the end result is less purchasing power.

 

[bfdd]

It will still mean you are poorer.

It doesn't matter if you earn less or have to pay more - the end result is less purchasing power.

This guy gets it, so we need equalization as we become more and more globalized. Westerners need to accept they simply aren't worth what they once were.

 

[mshan]

Reverse Off-Shoring from China has been starting to occur already:
- http://seekingalpha.com/article/814022-could-china-be-rebalancing-growth-to-the-wrong-consumer




Mexico may become the next manufacturing super-power (do we really want to compete with $2/hr unskilled labor for commodity items where only thing consumer cares about is price?):
- http://www.cnbc.com/id/49007307/What_s_the_Next_Global_Manufacturing_Superpower
vs.:

"During the recession, more than 2 million manufacturing employees lost work. Since then, just about half a million jobs have come back. You can do the math: that means at least 1.5 million people are still out of work.

But when you talk to employers, they say they can't find good people to hire. North American Tool Corp.'s Jim Hoyt has two openings right now for his northwest Illinois company, and he expects to continue hiring. But he often sees the same problem crop up during the application process.

"I'll write a few numbers down, mostly numbers with decimal points, because that's what we use in manufacturing, and have them add them or subtract them, or divide by two," Hoyt says. Job applicants often can't do the math.

Having basic math knowledge, especially of decimals, is important because of the precise inputs modern machines need. Like most manufacturers, North American Tool uses CNC, or computer numerical control, equipment. CNC machines make everything from the cutting tool parts North American Tool makes to automotive and medical equipment.

But calling these machines computerized is almost a misnomer because there are still plenty of manual calculations. And if you're off, even by a fraction, the equipment can crash.

Hoyt says a CNC crash usually happens because of a number that's typed in wrong or calculated incorrectly. "I'll hear a wreck in my office and pretty much the whole shop will get quiet," he says. Those crashes can cost tens of thousands of dollars in fixing the expensive CNC machines and lost productivity."


http://www.npr.org/2012/07/10/155837...ush-up-on-math

--> http://www.npr.org/2012/07/26/157033600/bypassing-college-dreams-a-different-road-to-work

U. S. higher end manufacturing Renaissance (better labor costs than Germany, Japan, U. K., etc.; natural gas as low cost energy source):

"By 2015, those factors will make average manufacturing costs in the United States lower by 15 percent than in Germany and France, 8 percent than in the United Kingdom and 21 percent than in Japan, the study projects. Factories' costs in China will remain 7 percent cheaper than those in the United States, however.

The competitive gap in some ways reflects the open U.S. labor market, where companies can quickly add or cut workers to meet changes in demand, said Hal Sirkin, a senior partner at the BCG consultancy and author of the report.

"In Europe and Japan, it's relatively hard to lay people off, and because of that you have employees for a long period of time that you may not be able to use," Sirkin said. "In the United States, there's much more flexibility."

Besides the ease of adding or firing workers, lower wages and Americans' readiness to move for work will make U.S. factory labor costs 20 percent to 45 percent lower than prevailing costs in Western Europe and Japan by 2015, the study found."


http://www.reuters.com/article/2012/09/20/us-usa-manufacturing-exports-idUSBRE88J1H720120920

 

[zephyrprime]

So yes, some companies couldn't shift everything to Mexico overnight even if the country was stable. But industries moving to China now could pick Mexico instead, and some of the less complex manufacturing now in China could be shifted as a first step.

Mexico is pretty high cost compared to countries less developed than China so it is unlikely that the less complex manufacturing would be shifted to it.

Most likely, new outsourcing from new companies will be more likely to pick countries other than China now than they were 10 years ago.

 

[zephyrprime]

By the way, when China stopped buying and started selling treasuries during the Great Recession, you could predict that the era of continued outsourcing to China was at an end. They've actually made more purchases recently so it's not completely dead yet but it's coming to an end. I don't mean that all the outsourced stuff will suddenly move back but I mean that there's not going to a NET exodus of outsourcing anymore.

Manufacturing is coming back to the US. There's going to be a NET gain here in manufacturing. There are some more third world countries left to exploit but none of them are as big or as eager as China was. The golden era of outsourcing is coming to an end.