The average hourly wage for auto workers in Mexico is increasing according to a recent article in the journal. Major automakers expanding or opening factories there are offering higher wages, benefits and incentives to attract workers. The competition among auto makers to attract and retain auto workers is high.
Global auto manufacturers flock to Mexico and other emerging countries due to their cost advantage. Hourly wages in Mexico, Brazil, China, India, etc. are much lower than in developed countries like shown in the graphic below:
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Source: It’s Getting Harder and More Expensive to Make Cars in Mexico, WSJ, Aug 14, 2016
Mexicans working at the auto factories get between $1 an hour to $ 3 an hour. Mexico’s minimum wage is 73 pesos or $4 a day. Hence auto workers earn much more than the prevailing minimum wage. Despite this Mexican workers are far cheaper since in all the developed countries hourly wages run into double digits. Mexico has many advantages for auto manufacturing due to many factors including the cheap labor, railroad and road transportation links and close proximity to the US.
As long as wages are cheap in emerging countries auto makers will exploit that.It is interesting to note that though auto makers have shifted manufacturing to lower cost countries prices of autos have not come down. In fact an average car costs around $20,000 these days. Pickups, SUVs and other types of vehicles cost double that if not more and have much higher profit margin for auto makers.