Labor Costs: China vs. Mexico

April 11, 2014

April 11th, 2014 — Mexico’s part of the U.S. import sector has climbed to a record-breaking rate of 14.4%.

Hoopnotica is one of the growing number of U.S. businesses bringing production back home or “near-sourcing” over to Mexico. The nation has been losing manufacturing to China for a considerable length of time. At the same time, things are changing now that the worth of the Chinese yuan is rising, the expense of shipping abroad has surged, and increased rivalry in Chinese processing plants has brought about work deficiencies. Lack of manufacturing in China could translate to more manufacturing in Mexico.

A multitude of areas in China have raised their minimum pay, with Shanghai’s general guidelines leading the way, according to details from regional authorities. Other areas are Chongqing, Shaanxi, Shandong, Beijing, Tianjin, Shenzhen and Shanghai. According to the Ministry of Human Resources and Social Security, in 2013, 27 areas in China raised their minimum pay rate, with an overall average rise of 17 percent.

The new minimum month-to-month payment in Beijing, Shanghai and Tianjin for 2014 has gone into effect. Seven districts and provinces including Southwest China’s Chongqing, Northwest China’s Shaanxi and East China’s Shandong have raised their minimum pay levels during 2014, and Shanghai is now at the top as far as pay level.

Employees in Shanghai are presently qualified for a minimum of 1,820 yuan ($296) as a month-to-month pay and 17 yuan as an hourly compensation, an increase of 12 and 21 percent, respectfully. Beijing is second after Shanghai as far as minimum compensation of 16.9 yuan. Be that as it may, regarding minimum month-to-month pay, it ranks lower than Shenzhen and Tianjin, which puts it at 1,808 and 1,680 yuan, respectfully. The minimum month-to-month pay is 1,560 in Beijing. Chongqing is the lowest in the group with the new minimum compensation of 1,250 yuan for every month and 12.5 yuan for every hour. All considered, labor rates in Mexico for similar labor is about $1.75 per hour or just over $300 per month, which is roughly the same cost of China.  However, Mexico manufacturing does not require long distance shipping costs and products reach their market in hours or days…not weeks.

Regional governments regularly redesign and increase present expectations for minimum wages yearly to guarantee the fundamental living conditions of employees in perspective to inflation and additionally to draw in new laborers as an aftereffect of the slowing supply of workers, due to the populace growing older.

In any case, the increase in minimum wages adds a great deal more to the work cost for companies, as managers frequently bring to the table higher pay rates to charm the employees. A lot of companies in the developed areas face troubles in recruiting enough foreign laborers after the Chinese-Lunar New Year.

Due to the effect of the rising work costs, a lot of people, many who are clothing and shoe creators have moved manufacturing plants to Southeast Asian countries where work is less expensive. Many others, especially in the consumer products industry, electronics, sporting goods and otherwise, are moving their manufacturing to Mexico.

This is an extraordinary time for Mexico manufacturing and it appear to be just the beginning.