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Could Mexico’s Manufacturing Boom be Helping U.S. Workers?

As Mexico remains in the midst of a manufacturing boom, what’s good for workers south of the border may also benefit some workers at home.

Mexico factoryAn article in the Los Angeles Times reports that factories in Mexico are increasingly being fueled by goods and services from the United States. The biggest growth has been in the auto sector. Major automakers such as BMW, Ford, Toyota, Chevrolet and Kia have opened dozens of plants there in recent years. But other manufacturing facilities are opening as well, including everything from aircraft assembly lines to electronics parts manufacturers. And all this is fueling commerce with manufacturing suppliers or assemblers here in the United States.

“Instead of thinking of Mexico as a separate part of production, it’s now part of our manufacturing process…Mexican companies aren’t just producing products that rival ours, they are producing parts of our products,” says Robertson.

The Times article reported that Wisconsin-based Evco Plastics has added jobs at its plants in Mexico and said that doing so allows them to offer lower cost parts to drive more growth. While that might mean fewer numbers of Americans being paid to work on the front line, owner Dale Evans said it has allowed him to move most of his 500 employees to higher-skilled tasks. “The easy things—people picking things up and putting them in boxes—that [kind of work is what] left. The difficult things you can do with machinery, that stayed,” he said.

“The easy things—people picking things up and putting them in boxes—that [kind of work is what] left. The difficult things you can do with machinery, that stayed.”

Evans is now training his employees to maintain robots that handle plastic parts. Factory output in Mexico is at an all-time high this year and up more than 30% since 2009. While factory jobs here at home have decreased over the past couple of decades due to automation, they have been slowly climbing again since the recession in 2009. And as Chief Executive reported in May, some sub sectors of manufacturing are starting to bring more jobs back home to capitalize on government incentives, quality, and proximity to market.

While it’s not yet a problem big enough to deter manufacturers, labor costs are already rising in Mexico. The Wall Street Journal reports that competition for finding and retaining employees is putting upward pressure on wages, as employers are now offering bonuses for skilled employees to remain. Vacancies are the norm and local officials in the city of Juarez estimate the city’s manufacturing sector has nearly 15,000 unfilled jobs.

“We have a huge supply gap in Mexico that needs to be resolved…We’ve only seen the tip of the iceberg of this shortage. Some plants have seen double-digit wage increases in recent years. Labor rates going up will be unavoidable,” said Stephan Keese, a partner at consulting firm Ronald Berger, who works with manufacturing firms in Mexico.

While the trend of moving low-skilled manufacturing jobs to Mexico is likely to continue, there is still projected growth for advanced jobs here in the United States. Scott Paul, president of the Alliance for American Manufacturing, told CNN that due to an aging workforce and a skills gap, there will be strong job demand in manufacturing in the coming years. The question is whether American workers will have the education and skills to fill those jobs.

“The average American has no idea how robust the manufacturing sector has been and is going to be. We just need to get people the skills to take advantage of it,” said Paul.

 

About Craig Guillot

Craig Guillot
Craig Guillot is a business writer based in New Orleans, La. His work has appeared in Wall Street Journal, Entrepreneur, CNNMoney.com and CNBC.com. You can read more about his work at www.craigdguillot.com.