The auto industry flocked to Mexico for the inexpensive labor. Now, they’re bidding it up
Manufacturers and parts suppliers are poaching workers, paying bonuses and offering perks, chipping away at the country’s low-cost advantage
The competition for employees—both finding and retaining them—is nudging up labor costs. Retention and retraining programs are becoming the norm as are bonuses for employees who agree to stay in place, especially those with valued skills. Some factories are luring recruits with perks such as a new cowboy boots. Vacancies are becoming the norm.
“We have a huge supply gap in Mexico that needs to be resolved,” says Stephan Keese, a Chicago-based partner at consulting firmRoland Berger, which works with manufacturers in Mexico. “We’ve only seen the tip of the iceberg of this shortage. Labor rates going up will be unavoidable.”
The pressure isn’t yet so severe that it is undermining the rationale for moving production to Mexico. But it is an unexpected sticker shock—labor is one of the few costs manufacturers can control—and threatens both profitability and production quality.