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.

Updates (9/27/23):

• Ratio of CEO Pay to Median Worker Pay at Big 3 Auto Firms:

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Source: Auto CEOs Make 300 Times What Workers Make. How That Stacks Up, WSJ, Sept 25, 2023

• The global car manufacturing wage gap: what do car factory workers earn?, Auto Express
• Auto Workers’ Median Hourly Salary for select countries (in 2015):

Source: Statista

• Growing Pressure on Automotive Industry Wage Growth in Central and Southern Europe, Paylab
• Major Car Manufacturers Ranked by Number of Employees, Alan’s Factory Outlet
• Average Auto Worker Salary in the United  States:

Source: Intuit

• Low Cost Manufacturing Labor in Mexico’s Automotive Industry, Tecma
• Average Auto Worker salary is is 568 pesos or US $33 a day , WSWS
• UAW auto strike: Why US Automotive CEOs make more than global competition, The BBC
• US Auto Workers Wages plunged since 2009 restructuring:  Chart

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Source: UAW-automakers negotiations pit falling wages against skyrocketing CEO pay, EPI

Related Posts:

• Auto Workers in Mexico Earn Less Than Those in China, TFS
• Manufacturing Labor Costs in Mexico vs. China, TFS
• Comparing Manufacturing Labor Costs in China and Mexico

Smoking rates have declined by one fourth since 2000, according to a report by the OECD. About 19% of the daily population smoked daily in 2014, the latest year for which data is available. But the rate varies widely across OECD member nations.

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Source: OECD

The former Soviet republic of Lativa has the highest percentage of smokers at 36% and Mexico has the lowest at just 8%. The average OECD rate is 19%. Next to Mexico, Sweden and the US have the lowest rates. Smoking rates are lower in Scandinavian countries.

Despite the decline in OECD countries, global tobacco  giants are growing and their profits are going up. This is because while sales is declining developed countries they are soaring in developing countries. Tobacco usage is increasing in emerging countries like China, Indonesia, India, etc.

Last  week Britain-based British American Tobacco Plc(BTI) offered to buy the rest of Reynolds American Inc(RAI) that it doesn’t already own. In general major tobacco firms are the favorite of income seeking investors. Other companies in the tobacco industry include Philip Morris International, Inc.(PM), Imperial Tobacco PLC (ITYBY), Altria Group Inc.(MO),  and Lorillard, Inc.(LO).

Related:

• A Review of the Global Tobacco Industry (TFS)

Disclosure: No Positions

The US is considered as the most competitive market in the world. However in reality most of the major industries are a form of monopoly or oligopoly. When industries are dominated by one company or a handful of companies customer suffer as prices inevitably increase due to pricing shower and lack of competition. But investors and management in these firms benefit as profits rise.

I written about the scourge of  monopolies and oligopolies in the airline, railroad, cable tv, ratings industries before. Other industries such as auto manufacturing, bus transportation, passenger rail transportation, food, healthcare, entertainment, media, etc. are also plagued by this phenomenon. But somehow this setup is accepted by the state and the public. And then the same public wonders why customer service is awful in most companies, why wages are stagnant, why the rich get richer and the poor get poorer, why bills keep going up and up every year, why politics is corrupted by big money, etc.

Yesterday news broke that the telecom giant AT&T(T) is going to acquire cable TV giant Time Warner(TWX). If this deal goes thru it will be another nail in the coffin for competition. Already most cable companies including Comcast(CMCSA) are notorious for price gouging and bad customer service. This merger, if approved by regulators, would further hurt American consumers.

The following chart shows the evolution of AT&T and Time Warner:

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Source: AT&T Is in Advanced Talks to Acquire Time Warner, WSJ, Oct 21, 2016

Disclosure: No Positions

Social spending includes various benefits offered by a country to its residents such as healthcare, pensions, social security,  food stamps, relocation money provided to refugees, funding for community activities for illegals, etc. This expenditure varies widely across OECD member countries.

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Source: OECD

France tops the list with social spending amounting to over 31% of the GDP and Mexico spends the least at 7.5%. The US spends slightly less than the OECD average of 21%.