China’s high wages help manufacturing in Mexico

A report this past September by the Wall Street Journal discusses the rising labor rate in China related to that of Mexico.  As of September of 2012 the WSJ reports that “Mexico may already be a less-expensive place to make an array of products for the U.S. market, said Boston Consulting Group, which estimates that China’s average manufacturing wage topped Mexico’s this year, when accounting for differences in productivity” The article goes on to state that Mexican workers manufacturing in Mexico on average produce more than Chinese workers.

Despite certain disadvantages Mexico is poised to make something of a comeback in the world of manufacturing. The article bring this to our attention ” As Chinese wages continue to rise, Mexico looks the best-placed to benefit. Mexico, which exports more than all the rest of Latin America combined, was the least-expensive place outside the U.S. to manufacture for the U.S. domain address market, according to a December 2011 survey by consulting firm Alix Partners.” Mexico has both short lead time to the US markets as well as the opportunity to ship large and bulky items at a relatively low cost compared with China.

One additional benefit mentioned by the Wall Street Journal is the direct correlation of increasing Manufacturing in Mexico to a strengthened US based supply chain. ” A return of business to Mexico also would benefit the U.S. American companies earn 37 cents for every dollar that Mexico exports because Mexican companies rely heavily on U.S.-made parts. The ratio is far lower for Chinese firms, which use mostly locally made inputs.”

To read the entire article click here


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