For some time there has been a call for American companies to move their factories to Mexico and other countries. We know because Kleer-Fax president, Louis Nigro, has been made various offers to make the move. Additionally, several of our competitors have taken them up on it.
The offers come with a variety of attractive reasons to consider, such as:
- Labor rates are 1/6th what they are here
- It’s a way to be in the global economy
Examples of companies doing this can be found in a 2013 article of Manufacturing & Technology News where it was noted that Philip’s Lighting Company in Bath, NY laid off 265 workers to move the jobs “out of the country,” Hewlett Packard sacked 500 Conway, AR employees for a “global restructuring,” and Flextronics Americas dumped 147 Stafford, TX workers to move the jobs 10 hours west to Mexico, just 8 miles south of El Paso.
What is disheartening is that when these jobs leave a community so do millions of dollars that support other businesses. This includes jobs supported by the company buying insurance, materials, and breakroom supplies, to the employees who care for their families and donate to local charities.
But some say that this is for the best, so let’s explore these benefits.
Mexican Workforce Costs 1/6th That of the USA
There is a lot of talk about the disparity between wages earned in the US, but if people here knew how hard people in Mexico are being slammed down by their minimum wage they’d be appalled.
In the US, a minimum wage worker will make $9.00/hr, or about $18,000/yr in 2015. At our factory, there will also be health and life benefits, holidays, vacation/sick time, company barbeques, turkeys handed out at Thanksgiving, etc. The average US income, according to the US Census, is roughly $52,000. This means that for every $1.00 a minimum wage worker earns, the average US income earner makes $2.88, or almost 3 times more.
In Mexico, a minimum wage worker earns only 19% of the average, meaning that for every $1.00 earned, the average person in Mexico makes more than $5.00!
This is income inequality by a far wider margin. Worse yet, Mexico’s minimum wage has fallen, and it is barely a 1/4th that of Turkey’s minimum wage.
For more on this, you can read this 2014 article from The Economist.
It’s Part of the Global Economy
We already participate in the global economy by selling our products to people throughout North and South America. Currently, we are looking to expand our exporting, but while we think of exporting our products, we are not going to outsource our jobs, though we have been discussing a second facility to better service customers on the West Coast.
Also, while we are global, we are proud of the customer service we can offer local businesses. For example, when a law firm in New York City needs something same-day (and they do at times) we can get it to them. If we were in Mexico that wouldn’t be possible. Just the other week we received a phone call from a friend at Granite Office Supply in Utah. It was after-hours, but, luckily, someone was here to take the call. When we thanked her for their business, she thanked us for always being able to get them what they need. It’s a two-way relationship.
Conclusion: Mexico Has Good Opportunities, but Not For us; Not Yet
We have been discussing opening another location, but it is not going to be in Mexico because our Mexican customers do not make up enough of the market share to deserve us stimulating their economy. If they made up a third of our sales, it would make sense.
The same can be said for our Canadian customers. As of yet, though, we have been enriched by US-based customers, so we will continue to contribute directly to the US economy. With some hard work, we can have another location, and our Mexican and Canadian customers will benefit from it, but only for the ease of logistics based on where it is located in the US, such as in places like Reno, NV, Dallas, TX, or Portland, OR.
Our goal is to better serve everyone we do business with, and it would be a direct contradiction to our values if we didn’t include the community where we live and the families who have worked so hard for us over the years.
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I have seen this personally. My company was going to make a move to Mexico, but after we saw the conditions that would be put in place to make our products, we just couldn’t justify the potential gains.
Also, like you, we also didn’t think we would end up coming out very far ahead, adding further insult to the injury of what we would do.
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