Rising Wages in China Make Mexico More Competitive But Challenges Remain

In China, Economy, Mexico on September 17, 2012 at 11:51 pm

Mexico’s favorable geography

Rising wages in China make Mexico more competitive by comparison.  From a Wall Street Journal article by David Luhnow and Bob Davis [1], highlights follow:

Mexican wages, including benefits, average $3.50 an hour, compared to $2.50 an hour in China, after wage pressures there.  Given Mexico’s proximity to the United States, especially for border cities like Juarez, the slightly higher Mexican wages are often a better deal on account of quick time to the US market as well as lower shipping costs.

Because most parts are sourced locally, Mexican production is better for US suppliers than Chinese.  Most manufacturing inputs in China are made either there or in nearby countries like Malaysia or Thailand, whereas many inputs for Mexican production are made in the US.But, Mexico has disadvantages.  One factor going for China is its own gigantic domestic market of over one billion consumers.  Factories in China can ship to the local market as well as for export to the US.  The Mexican homicide rate (18.2 people per 1000,000 people) is higher than five in the US and 1.1 in China.

Lastly, an accompanying chart shows the woeful problem of the Mexican public education system.  Whereas China rates #54 for overall quality of eduction system (and #5  for tertiary education enrollment, #33 for availability of scientists and engineers), Mexico rates #107 for education (#79 tertiary enrollment, #86 for availability of scientists and engineers).Geography and hard-working people have Mexico in a favorable economic place.  But, decades of underperforming education, especially in math and science, hurt its competitiveness.  Furthermore, the legacy of local Mexican police corruption and spillover from demand for illicit drugs in the United States have led to horrific violence from cartels and criminal gangs. 

Mexican Maquiladora



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