Lower labor costs in Mexico than China

In recent years, the wage dynamics in manufacturing sectors across Mexico, China, and the United States have shifted notably, influencing global production strategies. In the North American region, the labor cost is up to 10 times lower than in the United States or Canada; in 2023, the government of Mexico increased the daily minimum wage from $8.80 to $10.50, however compared to the United States with around 60 dollars still much less.Even compared with other Latin America countries like Argentina or Brazil, Mexico is cheaper.

Mexico vs. China:

• Hourly Wages: As of recent data, Mexico's average manufacturing labor cost is approximately $4.50 per hour, while China's is around $6.50 per hour, indicating a 44% higher cost in China.
• Monthly Earnings: On a monthly scale, Chinese manufacturing workers earn about $840, compared to $480 in Mexico.
• Wage Trends: Over the past decade, China's manufacturing wages have more than doubled, reflecting rapid economic growth and an expanding middle class.

In contrast, Mexico's wages have remained relatively stable, enhancing its appeal as a cost-effective manufacturing hub.

Mexican vs. U.S. Salaries

A worker in the United States without any bachelor’s degree earn up to 4x more than graduates in the equivalent fields in Mexico. Low skilled factory workers earn around 80% less than the $12 per hour wage which can typically found in the United States or other similar high-wage countries.

The salaries in general vary drastically across different sectors manufacturing such as healthcare, IT, pharmacy etc., like any other country. Skilled machinists cost around 50% less and engineers just out of college have a 40% lower employer cost. In addition, the living costs are 70% less than their American counterpart and 44% less than a European country like Spain.

• Hourly Wages: In the U.S., manufacturing workers earn significantly more, with average hourly wages around $33.

Those substantial differences makes Mexico an attractive nearshoring destination for companies aiming to reduce labor costs while maintaining proximity to the U.S. market. On average, clients can expect to save as much as over 50% on labor costs when operating in Mexico, especially in the manufacturing industry. However, most of the company pay its employees significantly more than the minimum wage; around 60 million people earn just over 1000 Dollars monthly.

Various Factors influence wage dynamics

Rising wages in China, driven by economic growth, demographic shifts, and currency fluctuations, are reshaping global manufacturing decisions. As costs increase, manufacturers are exploring alternatives like nearshoring to Mexico, where stable wages and proximity to the U.S. offer competitive advantages.

To mitigate risks, companies are also adopting diversification strategies, spreading production across multiple locations to balance costs and ensure supply chain resilience.

White Collar Salaries in Mexico

• engineers and technicians specialized in design, robotics and mechatronics earn about 1'500 dollars monthly upon graduating, with their salaries rising up to $4'500 dollars after working in the industry for two decades.
• A software designers start around $1'200 dollars per month, rising to $4'000 plus bonuses after 15 years of industry experience.
• A study by the Brookings Institute showed that STEM workers in tier-two U.S. cities who do not have a bachelor’s degree can still expect to earn up to 4x more than graduates in the equivalent fields in Mexico.
• The average STEM worker without a bachelor’s degree earns $62,092 in Bridgeport, Connecticut; $48,353 in Wichita, Kansas; and $44,851 in Tulsa, Oklahoma.
• Across the United States, the average starting salary for entry level STEM jobs for candidates without bachelor’s degrees is $47,856. According to data from Burning Glass Technologies, for jobs requiring a bachelor’s degree or higher, this rises to $66,123, that’s almost 5x the most competitive starting salaries for Mexico’s STEM graduates.

Salaries Mexican States

Between 2019 and 2023, the country saw a steady increase in the minimum wage, addressing income inequality and enhancing the quality of life for low-income workers. These substantial wage increases, particularly after the pandemic, reflect the government's commitment to social equity and economic inclusion. Additionally, increased investments in education, healthcare, and poverty alleviation are helping foster broader economic recovery by stimulating consumer spending and boosting domestic demand.

The salaries vary from state to state and to the strategically location. Along the northern border such as Tijuana or Region Chihuahua, the wages are expected around $16 per day as it is competing directly with its neighbor country United States.

Nearshoring effect and Inflation increase salaries

With the inflation and especially the nearshoring trend, salaries will in general increase in Mexico. In April 2023, Ford Motor Co. and its Union of the state Chihuahua have agreed to raise wages by 8.2% which is an increase above the inflation. Though it can be assumed that it is also a strategically salary increase; with the whole nearshoring trend which attracts hundreds of new companies entering Mexico, the fight of becoming the best talents have just started.

Indeed, in the last decades, the “World Salaries Report” of the International Labour Organization reveals that real salaries in China doubled between 2008 and 2019, far exceeding the global growth rate. In other words, the whole market focused to manufacture its products in the Asian market, so the demand finding the best talents increased also the salaries. In the year 2018, the average salary in Mexico wasUS $4.45/hour, compared to China’sUS $5.51/hour. Manufacturing costs remain competitive.