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Shifting jobs to Mexico may sometimes result in the creation of higher paid jobs in US

Shifting jobs to Mexico may sometimes result in the creation of higher paid jobs in US

In some circumstances organized labor may have a different take on shifting jobs to Mexico, should the tradeoffs make sense.

Outsourcing US jobs to Mexico is a controversial subject, yet some claim that doing so can actually bring higher paying jobs to the US. Many economists and other experts claim that, in some cases of shifting jobs to Mexico, overall good effects can outweigh the bad.

The Automotive Industry as an example

Over the years, automotive manufacturers have engaged in shifting jobs to Mexico. The backlash from employees their unions and the communities where their US plants were located was negative. Now, however, things me be marginally changing.

Fiat Chrysler recently reached a tentative agreement with a prominent union in which union members agreed to the plan to move the production of lower-margin vehicles to Mexico in exchange for profit-sharing and other incentives – but also because the arrangement meant the production of higher-margin vehicles like SUVs and trucks would take place in the US. In other words, union members recognized the tradeoff value in focusing on higher paying jobs related to the production of higher margin vehicles, and shifting jobs to Mexico that are those tied to the production of lower end
units.

Moving cars to Mexico makes sense,” says Haig Stoddard, an industry analyst for WardsAuto. “It makes sense to build less-profitable vehicles in Mexico and more-profitable ones in the US.”

Other carmakers are also following this trend. Ford, for example, is negotiating with the unions with the goal of shifting jobs to Mexico for small-car production. All automakers outsource to lower-wage countries, but Mexico is a favorite of US companies, because of proximity, quality, and other factors that include the use of a high percentage of US made components and other content.

Contributing Factors

One reason this tradeoff makes sense to so many in this and other industries is that it allows for improved efficiency. In spite of the negative press it receives for the initial effect, outsourcing in general tends toward greater efficiency overall, as, Jay Brysonn, a global economist for Well Fargo puts it:

“When jobs move from a factory in the South to one in Guatemala or China, it certainly has a negative impact on that community in the short run. But in the long run it makes things more efficient.”

This efficiency in allowing countries like Mexico to provide high-skill, low-wage labor for the production of goods such as low margin model cars also means greater profits for the companies. While some believe that these profits only pad the accounts of corporate leadership, research published in the American Economic Review suggests that it they enable additional spending on new jobs in the US, such as sales, marketing, design, and others that are well compensated.

Today, the US is increasingly viewing Mexico as a partner in a global economy. Rather than focusing on competition for the same jobs, the US and Mexico have, over the years, developed a relationship of comparative advantage in which each country does what it is best at. In some instances, shifting jobs to Mexico may actually result in the creation of higher paying jobs created in the US.

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