A report released in March on workers’ pay in the automotive sector has been given new legs by last week’s announcement by Nissan and Daimler of a new auto plant, and another expected this week of a new BMW plant.
The number of new automotive plants that have opened in Mexico in recent years will likely make it the number-two auto exporter to the United States this year. In 2015 it is expected to top Canada and become number one, reports Bloomberg.
By 2018 production is expected to total more than 4 million units, compared to 2.93 million last year.
But the report on remuneration in the industry, by investigator Alex Covarrubias Valdenebro, with the support of the Friedrich Ebert Foundation, highlights the fact that Mexico’s automotive factory workers are the lowest paid in the world, while the automotive firms themselves enjoy profit levels that are among the highest.
A report in Vanguardia says Mexican auto workers are paid on average between US $3.60 and $3.90 an hour to work on the asssembly line. The country with the next lowest pay is Taiwan where the average rate is $7.50 per hour. Poland is next at $7.80, followed by Brazil at $11.40.
At the other end of the scale are Germany, where the average pay rate for assembly line workers is $52 an hour. Belgium follows at $41.70 and Canada is next at $40.40.
Mexico is becoming the China of the West, claims the study, attracting a high level of investment in the auto industry for its attractive labor costs and access to markets.
In 2006, it says, wages represented 30% of the value of the sector; five years later they were 22.3%. The study points to labor costs in the U.S. being almost three times what they are in Mexico.
There is a significant range in daily pay even within Mexico, according to the report. At the Nissan Civac plant in Morelos the figure is 413 pesos; at the bottom of the scale is General Motors’ plant in San Luis Potosí where average daily pay is $217.
The study’s author attributes the low labor costs in Mexico to the lack of union support for workers. “When the regions and workplaces can count on strong unions with a tradition of assertiveness, experience and skill with collective bargaining as well as the defense of workers’ rights, salaries improve or are maintained at higher levels than the rest of the industry.”
This might hold true in the U.S., but it doesn’t in Germany, which produced twice as many automobiles in 2010 as the U.S. and paid its workers twice as much. Yet Germany’s big auto makers are very profitable, reports Forbes.
The report cites author Kevin Brown, who wrote that Germany’s autoworkers union, IG Metall, and the country’s constitution contribute to a framework for a system of conflict resolution and the existence of works councils in the factories.
The result is a collaborative system, rather than adversarial.
But to draw parallels here with Mexico would be unrealistic. What is perhaps more realistic is the difference the automotive plants — which employ about 580,000 people — have made to the lives of many families.
Alberto Rabago, a union official, said in a Washington Post report last year that wage comparisons with the U.S. miss a Mexican reality. “When I came here (to the Saltillo plant in Coahuila) 20 years ago people didn’t even have indoor plumbing. Now they have pickup trucks, satellite TV and send their kids to universities.”
He also said the Mexican worker “is a natural craftsman, and global investors are showing their confidence in Mexican labor.”
Eduardo Solis, president of the Mexican Automotive Industry Association, told AOL that the auto manufacturing boom is creating a new generation of young engineers and funding automotive research in the country. “It’s not only about lower salaries. That’s short-sighted. It is a component of a larger equation that has to do with the expertise we are developing.”
Another way of looking at the pay of Mexican auto worker is to draw on The Economist’s Big Mac Index for a reference point. While a Mexican auto worker must put in three-quarters of an hour to buy a Big Mac, his Canadian counterpart needs to work only seven and a half minutes.
However, in Brazil, where the worker earns three times as much as he would in Mexico, it will still take half an hour to earn enough to buy the hamburger.
But why are we talking about hamburgers? In the end the only valid comparison for Mexico would be to use the cost of a taco, but that index hasn’t been developed yet.