Why Mexico Manufacturing Improves the US Economy07.17.17
Time and time again, the prevailing message has been that sending manufacturing jobs to Mexico hurts the U.S. economy and takes away jobs from workers in the U.S. But, there are facts that dispute this idea.
In fact, companies that utilize Mexico manufacturing improve the U.S. economy. The manufacturing industry in Mexico grows the American economy through hiring more U.S. workers, raising employee productivity, and increasing spending on imports to the U.S. After reading this post, you’ll understand the positive impact that manufacturing in Mexico has on the U.S. economy.
Manufacturing in Mexico leads to hiring of U.S. manufacturing workers
Companies that use manufacturing in Mexico hire more U.S. workers. According to an article in the Los Angeles Times, companies with manufacturing operations in multiple countries hire 250 U.S. workers for every 100 workers in Mexico that they hire.
We see that moving manufacturing operations to Mexico doesn’t eliminate all jobs for U.S manufacturing workers. This statistic shows that the opposite is true; hiring more workers in Mexico leads to the hiring of U.S. workers.
Additionally, data from the U.S. Bureau of Labor Statistics shows how the U.S. and Mexico economies rise together. This data demonstrates how a rise in the number of U.S. workers in construction and assembly plants reflects a rise in the manufacturing industry in Mexico. Also, the data implies that investment into Mexico manufacturing increases U.S. manufacturing.
Manufacturing in Mexico increases productivity of U.S. workers
Manufacturing is a process that involves a certain, necessary amount of tedious steps. These steps are wasteful of employee working hours if you consider a typical U.S. worker in auto manufacturing makes $40 per hour. Instead, hiring workers in Mexico to handle the tedious work frees up manufacturing workers in the U.S to work on higher-level, more valuable tasks.
As these lower level jobs are filled, we see U.S. manufacturing workers move into new roles as supervisors and managers. These new roles come with increased responsibilities and a higher salary, which are benefits of manufacturing in Mexico.
The manufacturing boom in Mexico has made manufacturing more efficient in the U.S. Between 2000 and 2016, manufacturing output in the U.S. increased from 112.3 to 129. At the same time, the number of U.S. workers in manufacturing decreased from 17 million to 12.3 million. These statistics show that manufacturing in the U.S. was actually more productive with fewer employees, by freeing up U.S. workers from lower-level tasks.
Manufacturing in Mexico raises spending on U.S. imports
One indicator of the health of the U.S. economy is spending on imports. According to a study by the Woodrow Wilson Center, 40 percent of U.S. spending on imports from Mexico are on American products manufactured in Mexico.
This large value means that the U.S. invests heavily in its own products and services. These products are manufactured at lower costs, which trickles down to consumers through lower retail prices. Also, it shows the trust that the U.S. has in Mexico manufacturers to manufacture high-quality products and services. After all, Mexico is the most alluring emerging market.
We covered many ways that the U.S. economy is boosted by manufacturing in Mexico. Let’s quickly review what we learned.
What We Learned
Without a doubt, manufacturing in Mexico supports the U.S. economy. By hiring more workers, increasing employee productivity, and increasing spending on U.S. imports, Mexico manufacturing has a positive effect on U.S. workers and the U.S. economy at large.
Before you manufacture in Mexico, it’s important to understand the associated operational and labor costs. Check out this white paper on the cost of manufacturing in Mexico.