Average Hourly Wage In The US Vs. The Hourly Wage In Mexico

October 30, 2021

Regardless of how much automation you use for streamlining your operations, manufacturing will always be a labor-intensive business. This is why labor costs typically take up a large share of overhead, amounting to almost 70% of total business expenses. 

Due to such factors, companies have prioritized looking for ways to reduce labor costs for a better bottom line. With rising labor costs in the U.S. manufacturing sector, Mexico has now come into play. 

Most companies that seek to increase their manufacturing capacity by going to Mexico have realized that lower costs do not necessarily mean lower quality. The reality is that by lowering their labor expense, these companies can invest in additional training for their personnel, resulting in the production of high-quality goods at a fraction of the cost, which is one of the main advantages of manufacturing overseas or offshore.

Average Hourly Wage In The US Compared To Those Of Mexico

Like most countries, wages tend to vary based on the specific region and the complexity of the manufactured products. Reports from the U.S. National Bureau of Labor Statistics show the average wage for direct manufacturing labor ranges from $16.07 to $25.98 per hour. On the other hand, data from the Tetakawi field studies revealed that Mexico’s hourly manufacturing wage was $2.40 to $3.04 per hour.

There are also other costs, in addition to wages, that have to be considered. Employees across most regions expect certain kinds of benefits aside from their basic salaries. 

However, such costs, in general, are highly competitive in Mexico when compared to the U.S. For instance, employers in the U.S. need to keep up with the rising health insurance costs, which recently reached $20,000 a year, unlike Mexico’s mix of affordable and subsidized healthcare.

There is also the cost of hiring, which might include advertising open positions and training for both the employee and the manager needed to oversee that employee. Multiply those costs by the frequency with which you will need to hire part-time, full-time, or temporary workers. Most of these costs can be offset by working with an employment agency experienced in recruiting staff in specified regions.  

Low Cost Does Not Translate To Mean Low Quality 

One may assume that spending less on labor will mean getting lower-quality products from your workers. However, that is not the case when it comes to the manufacturing sector in Mexico. 

The thing is that manufacturing and foreign investment have provided such a great boost to the Mexican economy that the country has done a lot toward ensuring that its workforce is up to the challenge. 

Several manufacturing training programs are also going on in Mexico, and their numbers only continue to grow, especially around industry clusters, such as aerospace companies in Mexico. These programs usually pair technical training with hands-on experience in manufacturing, just like with internships. This is one of the main reasons companies are moving to Mexico from the U.S. for their manufacturing, as they are often guaranteed to have skilled labor immediately available.

This is the path the federal government continues to pursue today by pushing investments in vocational training programs in high schools and technical institutions. In addition, Mexico’s population is expected to grow significantly, and such strategies will help develop its future workforce.   

In Conclusion

As mentioned earlier, labor costs will typically vary from region to region, the potential workforce you wish to recruit, and the level of local competition. To better understand regional labor costs, you should dive into U.S. national labor reports and data from Tetakawi’s regional labor statistics to get information that can benefit your company.

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