He detailed the sharp increase in labour costs as a barrier to foreign investors, which goes hand in hand with ambitious reforms that will make operations more expensive by reducing the work week from 48 to 40 hours.
“The government also proposes extending maternity and paternity leave and requiring year-end bonuses equivalent to up to 30 days’ salary. “The USMCA, which has provisions to protect workers’ rights in North America, is compatible with these changes, but if all of these measures are implemented as proposed, BCG projects that labor costs in the Mexican manufacturing industry will increase by 10 to 20 percent.”
The global firm said that this increase in labor costs must be measured in relation to the rise in the same in the United States derived from the recent contracts of the UAW automotive union with the so-called three big automakers in Detroit, where Mexico will retain the advantage.
However, he said Mexico suffers from a shortage of skilled workers in key sectors. “Attrition rates among manufacturing workers have approached 60 percent in some factories as companies step up competition for talent by offering benefits such as retention bonuses and health clinics, free transportation and meals. “And companies increasingly operate their own training programs to compensate for limited curricula in Mexican schools,” he said in his analysis “The Changing Dynamics of Nearshoring in Mexico.” Although he said the country remains the best option for nearby production for many manufacturers, he suggested making assessments under the current environment. “Those looking to build new factories should carefully evaluate the dynamics. Growing labor, infrastructure, and market access constraints could alter the calculus of which part of Mexico is the best nearby production option for certain industries and products, and whether it may be time to explore other countries in the region.” Such decisions, he said, should be based on a new, holistic analysis that compares manufacturing readiness and potential risks. He even urged some sectors to look beyond Mexico to serve the United States, such as in the medical device sector, where it is competitive in Costa Rica and with lower turnover. “Look beyond Mexico to Central America and the Caribbean. Given Mexico’s rising labor costs and uncertainties about access to the U.S. market, it may be time for some companies to explore other nearby options as well.” BCG said that for the automotive sector there is no low-cost nearby alternative other than Mexico.
#Mexico #loses #job #attractiveness
