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The Cost Advantage of Labor in Mexico

Labor in Mexico

One of the main reasons why companies outsource is for cheap labor. Years ago, this kickstarted a move toward China. But recently, Mexico has been attracting large manufacturing operations to move across the border. 

With a low cost of labor and proximity to the United States, it’s become a hotspot for automobile, HVAC, and aerospace companies, among others. If you want to know how much of a cost advantage expanding to Mexico can be for your company in terms of labor, get an estimate using Tetakawi’s payroll cost calculator for Mexico.

How Much Is Labor in Mexico?

Labor in Mexico is almost half of the $7.25 minimum daily wage in the US. Unskilled labor (fully fringed) starts at around $4.20 per hour in further regions (like Bajio), and while it goes up to $4.90 in the borders, it’s still cheaper than the alternative in the mainland, especially when you consider that direct manufacturing labor in the US typically averages at $17.40.

Cheap labor is consistent across the board for all positions. From painters to machinists to production managers, average wages are generally much cheaper in Mexico than in the US.

Labor Costs in Mexico Versus China

The cost of labor in Mexico is also more affordable than in China, which used to be a popular outsourcing destination. Wages in Mexico are almost 40% cheaper since labor expenses in China have followed a steep curve throughout the years, while Mexico’s wage rates have remained stable. 

That said, it’s important to note that as of January 2023, the Mexican government increased the country’s minimum wage by 20% to ₱207.44 (approximately $11.70) a day (versus ₱172.87 or $9,80); at the borders, this raised the daily wage from ₱260.34 to ₱312.41 ($14.70 to $17.60, respectively). Despite this, the cost advantage of labor in Mexico remains high, with wages still falling below what you’d pay for the same in the US.

Other Labor Costs to Consider

While local salaries are already affordable to begin with, what makes Mexico more attractive financially is the low cost of employee-adjacent expenses. Even with legally mandated payments, such as paid leaves, pension, and Aguinaldo bonus, it still comes out cheaper to outsource work to Mexico. This means you can even add on extras like healthcare and transportation benefits but still be paying cheaper than if you kept operations in the US.

Is Mexico the Right Move for My Business?

Mexico is continuously growing as a manufacturing hub–and with that, resources are becoming more abundant and accessible, with wages growing more competitive in rates. Expanding your business to Mexico is the right move to save on overhead costs while scaling your operations and broadening your reach to the Mexican market and beyond. To know how much of a cost advantage it is for your business to move across the border, use Tetakawi’s payroll cost calculator for Mexico for an estimate.

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