News, Insights and Best Practices for Manufacturing in Mexico

Tapping into Mexico's skilled labor force

02 Apr 2015

Category: Labor & Economics, Manufacturing in Mexico, Politics & Regulations

Expanding to Mexico has been a focus for many manufacturing companies. There are number of reasons why this is taking place. The first is the North American Free Trade Agreement and the more than 40 countries that have a deal in place with Mexico that allows production materials and finished goods to flow into and out of the country, tariff free. Another is the government initiatives that have made it easy for companies to come in and either build their own factory or operate through an offshore shelter.

"Mexico is on the fast track to becoming one of the most essential manufacturing nations in the world."

However, one of the biggest offshoring benefits for companies operating in Mexico is its highly skilled and technically proficient workforce. Certainly decreased labor costs are attractive to foreign companies looking to manufacture products in Mexico. But the lower wages - comparatively speaking - are not indicative of the high quality of finished goods coming out of the country. In the case of Mexico, foreign companies that produce consumer goods in the country will typically get much more than they actually pay for given the technical proficiency of the work force.

"Mexico used to be a country that produced T-shirts and jeans and shoes," Christopher Wilson, a senior associate at the Mexico Institute of the Woodrow Wilson Center in Washington, DC, told the Journal of Commerce Magazine. "Now it's a country that produces cars and airplanes."

At one point, China was the offshoring destination of choice for companies looking to capitalize on low-cost, high-quality manufacturing in a foreign land. However, over the last few years, China has begun to lose its grip as Mexico aggressively positions itself to be the first choice for foreign companies looking for an offshoring home.

"We are very familiar with the cost structure, skilled labor and quality of Mexico-based facilities," Brian Brockman, senior manager of corporate communications for Nissan North America, told Customer Experience Report. Nissan is one of the many recognizable auto manufacturers that have a manufacturing presence in Mexico and is currently in the process of expanding its operations in the country.

"The knowledge of these critical requirements gave us confidence in choosing Mexico for construction of our newest facility. We chose Aguascalientes specifically due to its proximity to Nissan's existing manufacturing plant in the same state, thus facilitating good access to skilled labor and supply network," Brockman said.

Citing Reuters, Customer Experience Report wrote that as much as $10 billion is being invested by automakers to improve Mexico's overall vehicle production infrastructure. Audi is in the process of constructing a $1.3 billion factory to produce its vehicles in San Jose Chiapa. This underscores how pleased these organizations have become with the ability of the labor force in Mexico to produce finished goods that are of exceptional quality on a consistent basis.

Mexico's emergence as an offshoring haven for foreign companies is rooted in the growing technical proficiency of its workforce. Mexico's emergence as an offshoring haven for foreign companies is rooted in the growing technical proficiency of its workforce.

The future of labor in Mexico
Given the sheer influx of foreign companies making substantial capital investments to improve Mexico's manufacturing capabilities, has had a positive effect on the country's economy. According to Trading Economics, in December of last year, the rate of unemployment in Mexico was 3.76 percent. In November of the same year, this number was 4.53 percent. The website wrote that not only was joblessness at the lowest levels recorded in Mexico since 2008, but it was the fifth consecutive month that a decrease was seen. As of December 2014, approximately 96.24 percent of the people living in Mexico were employed, either for themselves or working for a larger organization.

One of the contributors to Mexico's robust labor force is the education of the people living there. The government has implemented a number of initiatives, including adding certain curriculums to college coursework that will help groom the country's next generation of technical workers. There are even trade schools being constructed that focus on the skills that people will need to work in certain industries, such as manufacturing.

According to the OECD Better Life Index, 36 percent of adults between the ages of 25 and 64 have earned their high school diploma or equivalent, and Business Insider wrote that the college graduation rate in the country is 22 percent.

While both figures may seem low on the surface, these numbers are expected to show some improvement as the workforce demographic shifts to millennials who have a much higher proficiency from a technological standpoint than their previous generational counterparts.

In addition to being one of the fastest-growing economies, Mexico is on the fast track to becoming one of the most essential manufacturing nations in the world as well. From NAFTA to labor costs that are more competitive than any other country, Mexico is attracting attention from a variety of foreign organizations. It's not unreasonable to assume that their profile will continue to rise in the eyes of many companies.

Related posts