Demographics favor manufacturing investment in Mexico
When compared to the demographic characteristics of countries with which Mexico competes for foreign direct investment such as China and the United States, the numbers favor manufacturing investment in Mexico. As things stand at this juncture in time the median ages for the populations of each country are as follows:
- The United States 37.2
- China 36.3
- Mexico 27.7
These numbers reveal that, for the foreseeable future, the labor needed to start new, or expand existing businesses, in Mexico will be more plentiful than in its main competitor countries. Not only does NAFTA’s southernmost trade partner have a measurable advantage in terms of available workers, it also has an economic advantage that is formidable.
In recent years increased manufacturing investment in Mexico has been motivated by a fully loaded cost of labor that is clearly advantageous when compared with the cost structure of labor found in the United States and China. To put things into their proper perspective, in the year 2000, Mexican maquiladora workers earned four hundred percent more than their Chinese counterparts. The tables have turned on the numbers as of late, however. Manufacturing investment has been driven, in part, by the fact that by 2015 the prestigious international business advisory firm, the Boston Consulting Group, estimates that the cost of Mexican labor, when fully fringed, will be a reasonable twenty percent higher than that found in China for workers in similar positions. This, at first glance, twenty percent disadvantage, however, is more than compensated for by savings resultant from reduced transportation and inventory carrying costs that result from manufacturing in a Mexico location. .
Those pondering the possibility making a manufacturing investment in Mexico should also consider the fact that today’s Mexican youth is much better educated than were his or her parents. Today a Mexican of university age is more likely to stay home to pursue a degree in industrial engineering than to make the traditional northward trek that has been routinely undertaken by his or her forefathers. For example, in the Mexican state of Jalisco the number of senior high schools and preparatory schools increased from three hundred and sixty in 2000 to seven hundred and twenty-four in 2010, while at the university level Jalisco has established thirteen additonal institutions of higher learning within its boundaries over the same time period. This improvement in, and increased access to, education is occurring nationwide, and, to a degree, explains the fact that both Mexican gross domestic product and family income have risen in excess of forty-five percent since the year 2000.
Today demographics favor manufacturing investment in Mexico, as do an improved educational system that has resulted in the attraction of more direct investment to the country. This has boosted the nation’s overall economic health and the incomes of individuals and familie, as well as has encouraged more young Mexican to seek opportunities at home. .
Photo credit: Francisco Osorio