Why are U.S manufacturers moving their facilities to Mexico?

By Daniel Juarez Thursday, July 14, 2016 comments

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From Ford and General Motors to Procter & Gamble and Caterpillar, they all have production facilities in Mexico!

 

Let’s start off really simple: An engineer has successfully landed himself on a job as the very thing he majored in, he now has a well-paid job at a big U.S manufacturer. But guess what? Neither this guy nor the manufacturer reside in the States. In this picture, we’re talking about a Mexican guy who’s working on a U.S facility installed on Mexican grounds. He works out a good salary that pays him roughly around 75 USD per day, or 1500 USD a month. He loves his job and he’s very happy.

 

welder

 

Let’s take a look at it from different perspective: In the U.S.A, the same job position at the same company pays 312 USD per day! That makes up for 75,000 USD per YEAR, which is roughly four times more than its Mexican counterpart!

 

As you can see from these two examples, U.S companies are moving their facilities abroad to their border neighbors because labor in Mexico is staggeringly cheap. That wage gap can easily explain why so many manufacturing jobs have left the United States. Since 2000, the U.S. has lost about 5 million manufacturing jobs. Experts believe that NAFTA -North American Free Trade Agreement- is the main reason for this, because before it the Mexican government had restricting policies with foreign companies and couldn’t freely decide whom to hire.

 

NAFTA nullified these policies and U.S.A’s trade deficit with Mexico has sky rocketed ever since, so that means we’re bringing in a lot more goods from Mexico than we’re sending there. That’s good for American consumers but bad for manufacturing workers.

 

ford officeOriginal image: “Ford Motor Company Headquarters, Dearborn, Michigan” by Ken Lund, under license CC BY-SA 2.0, via Flickr.

 

Mexico has now become a business haven for several companies like Ford, General Motors, Procter & Gamble and Caterpillar, which have caused a spike in manufacturer jobs in the U.S, and has prompted Republican candidate Donald Trump to address the matter in his usual Trump self by stating he will “bring the jobs back from Mexico”.

 

How does he plan to do that you ask? Well, by raising taxes by 35% on things that come from Mexico, making them more expensive for American buyers. Expert Alan Deardorff, an economist at the Gerald R. Ford School of Public Policy at the University of Michigan claims “it would be a disaster” and that “we’d lose a tremendous amount of other jobs”.

 

Still, experts argue the fact that the only way to create more manufacturing jobs in the States is by investing in Mexico, by helping raise their wages so the middle class can afford pricier American-made products. After all, Mexicans travelling to the U.S for shopping purposes is a fairly common practice among middle and upper classes. Mexico’s economy goes up and we can have more stories of successful Mexicans making it big on U.S companies!