29 November 2014

The Mexican Car Making Miracle

A car plant in Mexico 

Car making in Mexico is taking off. It has a very important trade deal with the US and Canada (NAFTA) which gives it access to two large nearby markets. It has also established many other trade deals, which mean that Mexican made cars can be exported widely without hindrance.

If those factors weren't enough, low wages also make it attractive. I have heard that some infrastructure issues exist that can hurt the efficiency of getting cars made and out of the country. Still, it is a popular place to make cars.

One negative is how workers are paid there. It seems that while many jobs have been created, that hasn't improved pay rates the way it should, and therefore the standard of living of the workers. With all the money these workers are generating, it doesn't seem fair they don't get more. I'm not for greedy workers but people grafting in the Mexican auto industry are not paid much at all. In 2012, they were paid less than half what Brazilian car workers got.

Apart from the workers not being compensated as you would think was fair, it actually hurts the Mexican domestic economy. Better pay means more disposable income which lifts the overall economy, which is why the Mexican economy isn't growing as fast as other nations such as Brazil. Not that car makers getting cheap labour are too concerned about that. They go where they improve profit. It comes down to domestic policies to look after workers if market forces don't.

I suppose those with jobs in Mexico should be grateful. Maybe they have another story to tell that is more positive. There is often more to these situations than the obvious. However, on the face of it, it seems things could be better for auto workers south of the border.

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