No matter how much automation you put in to streamline your operations, manufacturing is a labor-intensive business. That means labor costs are likely a large share of your overhead, accounting for as much as 70 percent of total business costs. It’s no wonder that companies often look at ways to reduce labor costs as the first step in a cost-reduction strategy.
Of course, this is where manufacturing in Mexico comes into play. Companies who choose to increase their capacity by expanding into Mexico often realize that low-cost doesn't always mean low-quality. In fact, by reducing their labor costs, they can invest more in training their workers, and the end result is high-quality products at a fraction of the cost.
Breakdown of Manufacturing Wages in U.S. vs Mexico
As in any country, wages will range depending on the specific region and the complexity of the specific product being manufactured. However, the following breakdown of average wages in the U.S. versus Mexico will give you an idea of what you might expect to pay for labor (all wages are fully fringed hourly wages listed in USD):
Manufacturing Wages in U.S. versus Mexico
U.S. (National averages based on data from the Bureau of Labor Statistics)
To get a sense of what wages would look like for factory workers in Mexico, use our calculator here.
There are also costs beyond wages to consider. Employees across most regions expect some level of benefitsbeyond their base wage. However, these costs overall will be highly competitive in Mexico compared to the United States. For example, employers often struggle to keep up with the rising cost of health insurance in the United States, where the employer-provided health coverage recently eclipsed $20,000 a year, versus Mexico’s blend of subsidized and affordable employer-sponsored healthcare. And while U.S. employers might be surprised at the need to pay for transportation or meals at their Mexico operations, again, the costs are hardly overwhelming.
Finally, there is also the cost of hiring. This might include the cost of advertising a position, salary for a hiring and training manager, and the frequency with which you need to hire full-time, part-time, or temporary workers. Many of these costs can be offset by working with a shelter services provider experienced in recruiting for the specific region you hope to target.
Low-Cost Does Not Mean Low-Quality
The thinking may go that by spending less on labor, you’re getting less from your laborers. But that’s not the case when manufacturing in Mexico. Manufacturing and foreign direct investment provide such strong support to Mexico’s economy that the country has taken great strides to ensure its workforce is up to the task.
For starters, there are several manufacturing training programsin Mexico, and that number continues to grow, particularly around industry clusters. These programs often pair technical training with hands-on experience in manufacturing, much like an internship. This is a direction the federal government continues to push with investment in vocational training and programs that steer today’s high school students to technical degrees. With Mexico’s population poised to grow significantly, this type of investment is developing a strong future workforce.
Also, on-the-job training that keeps workers safe and productive is mandatory in Mexico. In 2013, Mexico’s Department of Labor and Social Welfare (STPS) published rules that updated the country’s Federal Labor Law to make employer-created employee training programs mandatory. Due to these changes, every company with more than 50 employees must develop a joint commission on productivity and training that is responsible not only for developing this training, but also measuring worker productivity to ensure that training is effective. Companies also must have a detailed training plan and provide workers with a certificate of training as proof of the skills they hold that can be shown to future employers.
Cost Of Living in Mexico vs. U.S.
Of course, lower wages are a result of the typically lower cost of living in Mexico versus the United States. Data from Trading Economics indicates that an individual’s monthly living wage in the United States for 2018 was about $1,600 per month, versus $231 per month in Mexico. That difference provides manufacturers with ample room to provide comfortable benefits packages for a wide range of manufacturing positions.
Your Labor Costs In Mexico
Of course, as mentioned, labor costs will vary depending on your targeted region, the level of local competition, and the potential workforce from which to recruit. To better understand regional labor costs, dive into Tetakawi’s regional labor market reportsor reach out for information targeted to your company’s specific needs.
Thinking about manufacturing in Mexico? Download this ebook and start moving your due diligence forward.
HOW MUCH WOULD IT COST YOU TO MANUFACTURE IN MEXICO?
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