Mexico Labor Costs: How the Rise in Minimum Wage Affects Manufacturers

Cost-effective labor is one of the biggest benefits of manufacturing in Mexico. However, with the recent change in Mexico’s minimum wage, U.S. and other foreign manufacturers may be wondering how this cost increase affects them.

For 2024, Mexico has instituted a 20% minimum wage adjustment, increasing from $312.41 pesos to $374.89 pesos in the northern border states and from $207 pesos to $248 pesos per day in the rest of the country. Though percentage-wise this change seems significant, as this is also the sixth consecutive year of minimum wage increases, labor rates in Mexico still remain relatively low compared to the U.S.

In terms of U.S. dollars, approximately $17.85 USD per day in the northern border states and $14.17 USD per day in the rest of the country. Therefore, the impact of the increase to foreign manufacturers will be minimal, if at all. Manufacturing labor rates in Mexico are already higher than the federal standard. On average, they equal $5.60/hour USD for a fully burdened, semi-skilled worker. Comparatively, labor rates in the U.S. for a similar role average $23/hour USD.

Regardless, understanding wage changes and employee expectations are part of any operational strategy. U.S. and other foreign manufacturers must look beyond the baseline amount of labor rates in Mexico to recruit and retain the best workers.

Creating a Competitive Compensation Strategy

Despite the minimum wage increase, cost-effective labor continues to be an advantage when manufacturing in Mexico. However, foreign operators should be prepared to offer a compensation package that aligns with current market trends. In addition to navigating changing wages, leaders need to be aware of Mexico’s mandatory worker benefits, including specific holidays and bonuses.

With a young, engaged industrial workforce, Mexico continues to be a reliable source of skilled talent. Yet, this also increases the level of competitiveness. Therefore, it’s favorable for foreign manufacturers to partner with local experts who are well-versed in labor costs in Mexico and best hiring practices.

Saving on Time and Costs with a Shelter Company

A shelter company manages a range of required administrative duties to launch production, including HR duties, such as recruiting and retention. They have the resources and knowledge to know where to source skilled labor and offer guidance on the level of compensation that will make recruiting successful. Also, as part of a comprehensive lineup of services, a shelter company also handles site selection, taxes and accounting, and trade and legal compliance.

Companies can get their production up and running more quickly and in a less costly manner than if they were to approach it as a standalone entity. In general, manufacturers can save up to 30% on labor costs in Mexico on administrative, HR, and trade- and compliance-oriented roles and launch operations in three to four months with the help of a shelter.

Evaluating labor costs in Mexico marks a key component when deciding if Mexico manufacturing is the right strategy. Whether you’re in the early exploration phase or anticipate launching production within the coming months, our team can provide cost estimates necessary to make a more informed decision.

To learn more about how our shelter services can support your manufacturing goals, contact IVEMSA today.

Source:
https://apnews.com/article/mexico-minimum-wage-increase-peso-dollar-69a48493847a08127e1aff92edc32012