Japan auto companies triple Mexican pay rather than move to US
asia.nikkei.com
asia.nikkei.com
But the next thing that happens is that it becomes more cost effective to automate, so you start considering that. Then you don't employ as many people, and they become skilled workers who maintain high tech robots instead of unskilled workers turning wrenches, so you're not actually paying unskilled workers $16/hour anymore.
Meanwhile the automation requires retooling, and maybe then you evaluate whether to retool the existing factory or to build a new one in a place with more skilled workers who can maintain the robots.
In year zero you just raise wages for the existing workers. In year two or five or ten, something else happens.
I don't think a bump in salaries that puts a country in the same ballpark as existing manufacturing locations( not counting the extra costs of manufacturing in the States or in Europe) is going to be such a big push for more automation. After a certain point the versatility of human workers is still useful.
> "The Standish Group started with a traditional metrics of success by looking at: “on time, on budget, and on target”. This means in this CHAOS Report 2018 for the year 2017: successful: 36%, challenged: 45%, failed: 19%. If they use their “modern” definition of success: “on time, on budget, with a satisfactory result.” You get almost the same results (33%, 48%, 19%)."
So, about 1/3 of IT projects are successful, including being on-time and on budget, and about 1/5 are total losses that fail to deliver any value at all. Not great odds and I'd expect the numbers are likely to be broadly similar in other engineering fields.
The decision on whether or not to embark on an engineering project (and whether to do it in-house or hire a third party) is among the most challenging duties executives have.
Economically that is always the desired direction, but not because people cost too much. Changes to automation are incredibly expensive to build. The benefits to increased automation are increased output volume and improved quality control.
Any cost reductions that arise are almost always completely unintended. To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product. You have to consider things like marketing, regulation, distribution, and so forth that do not benefit from the same automation efforts.
Nonsense. Are you trying to argue that computers are not an intentional cost savings over floors full of accountants using pen and paper? That a loom costs more than the labor required for hand weaving? Or that businesses don't realize that they are?
> To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product.
Hardly any manufactured product is genuinely long-term supply constrained. Output volume increases as a result of higher demand. Higher demand comes from lower prices. If automation isn't lowering prices then it isn't increasing output volume.
Yes. The key word there is intentional.
> Output volume increases as a result of higher demand.
Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
You're basically arguing that businesses are run by people who can't compare numbers to each other.
If automation costs less, as it often does, then businesses will adopt it because it costs less, because lowering costs increases margins (or volumes, if the lower costs are passed on).
> Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
Not indirectly. If there is demand for 5000 cars at a given price and you suddenly gain the capacity to manufacture 10,000 cars at that price, you still aren't going to manufacture 10,000 cars unless you expect somebody to buy them. Having the capacity without the demand is nothing.
And having the demand without the capacity would only cause businesses to expand capacity, whether through automation or otherwise. If it was profitable to make 5000 cars by hand and there is demand for 10,000 cars at that price then they would just hire twice as many people to make them if nothing else.
Which is why you amortize the up-front cost over the expected number of units adjusted for time value of money. In which case the automation often still results in lower overall costs.
> Comparing variable numbers is algebra but this is a calculus problem.
Calculus still leads to comparing numbers. Businesses know how to do calculus.
In what universe is replacing floors full of accountants with a room full of computer(s) anything other than intentional?
"Oh, whoops, we bought these computers on a whim, and now all of a sudden all but a fraction of these accountants are completely redundant! Total accident, who would've guessed it?"
Higher production volume means more material purchased, increased warehouse costs, people hired for warehousing, and everything related.
So it all depends on the organization.
My advice is to seek for opportunities overseas, or even in your country. For context I live in Ecuador.
In 2019 I resigned from my previous employer (an American company growing fast and short of 1000 employees nowadays). I moved to the Netherlands to work on a startup (that pays average for the Netherlands).
If you check my website (https://henvic.dev/) you can see it's not like I was inexperienced.
I was told the major reason why my request for a raise was denied was that my salary was great for where I lived in Brazil (northeast, which is poorer than São Paulo and Rio de Janeiro).
I considered the work I was doing worth way more. I started looking for new opportunities and asked to quit. This is not uncommon at all. Most of my colleagues in the tech field that are average or better have eventually moved abroad for money or started working remotely for a company overseas. Working for a company in a poor country where it has a local presence is almost always a sentence to getting paid less than you're capable of elsewhere or doing remote work.
Anyways, I think moving jobs is the best way to push for a raise, no matter where you live.
Factory workers are usually not well educated and they don’t handle money well.
A perfect example is Alberta oil sands. Many workers are extremely well paid. Most of them just spend everything and manage to get in debt with lavish lifestyle. Buying expensive cars, toys, large houses. They end up without any significant net worth and now are also hostage of their lifestyle.
There’s a term for that: lifestyle inflation.
On face value this seems to be a very progressive condition.
What do new cars cost in the US? Does a price difference of $500 or $1000 really make someone say "all right, I'd rather do without a car"?
Also it might make some families go "all right I won't get a 2nd (or nth) car".
The answer to this is obviously yes if you think about it (assuming you're talking about deciding against buying a new car specifically). The question is how many people?
If you can't afford a new Honda sedan you can: (1) look towards a Hyundai sedan, (2) look towards financing the same car for another year (which is why 7 year financing plans are common in the USA in the last decade), or (3) look at a used car.
A $500 cost difference between this month and next month means you may consider spending another $500+ on maintenance to keep your existing car running longer, but if you get into a place where your current car is no longer usable, there are several options before you have to forgo having a car altogether.
It's not like nothing happens until it's an $800 difference and then there is "quantum leap" change.
It also makes American workers start to ask questions about why it's so much cheaper to pay a Mexican worker "the same amount" and whether or not the things that money buys are worth what it's costing them.
For example, one of the major costs in the US is employer-subsidized health insurance, and employers subsidize it because it's tax advantaged. If they instead paid the employees more only to have the employees use the money to buy health insurance, the employees would pay more taxes. But they could still do it -- pay more and then offer a health plan with no employer subsidy. And then they're paying you "$16/hour" even though you lose half of it to health insurance premiums (and then even more to tax).
And if that got people asking why they pay tax on their health insurance when they buy it themselves, or why health insurance costs so much in the US, all the better.
Or it might just lower the compensation package that autoworkers get and make other industries more attractive by comparison.
Employees that want to know can already figure out what their employer pays for. Health insurance tax subsidies have massively distorted the health insurance markets for decades and there is more access to this knowledge than ever before, but there have been no major efforts to reform this and sever health insurance from company sponsorship.
That said, I think that would be one of the best things we could do to lower health care costs quickly -- force all employers to shift their health insurance to the employees and increase their pay by the cash equivalent.
That's not how humans work. The fact that information is available on the internet doesn't mean that people are actively going to go out and look it up. But if you send them a huge bill for something every month, they're going to look at it and ask WTF.
Is a single screw a part? Is the whole engine a part, or made of lots of parts? How far do you break each thing down until it’s a single part? Is it when it can’t be taken apart without cutting something? Could you get past that rule by just welding the things made by cheap workers together? So they are no longer seperate parts?
I have so many questions.
You could say 40% vehicle parts by mass but that doesn’t seem to capture the intent well either.
What it will do is prevent more things from leaving the US to go to Mexico.
Me being a cynic, I'm fully expecting the employees will have to return some of that cash via forced employee dormitories and such, but we'll see.
Globalism is a sham and it’s surprising to still see someone parrot its hollow logic that only makes sense if you look at it in the short term and on a small scale instead of as a long term society-wide trend.
We've underfunded career counseling in public schools for generations. We don't have any healthy career retraining system like other OECD countries do. Unemployment systems in the USA are nearly useless when it comes to retraining employees -- they really just act as job boards. Most states don't seem capable of attracting different industries, so when a batch of jobs leave a region, those employees struggle to find a near replacement. We have massive mental health and addiction problems so companies spend a lot of effort to avoid hiring anyone who might raise these costs for the company.
US society doesn't actually care about employees who don't take care of themselves. It's time we stop pretending like we do and call a spade a spade.
Tax the capitalists to reduce inequality and also fully fund better programs like healthcare, education? This funding is wages for workers and as a society we remain developed?
The only problem with all our systems is disproportionate gains at the top.
And a dollar goes much further in Mexico than it does in the US, so even if the net labour spending by companies goes down, more people will be able to have jobs. I think it's reasonable to believe that 2 people with jobs is better than one person than with a job, even if the 2 are in Mexico, and the one is in the US.
with all the talk of america first, who cares how this impacts US workers?
Perhaps, but Mexico has a ton of advantages that lots of other countries don't. They have cheap labor and can source parts quickly and cheaply from the USA.
Mexico has low-friction trade agreements with something like 40 other countries. In an age where America's government is demanding to renegotiate trade deals and do them all outside the WTO and rejecting all 3+ lateral deals, Mexico's trade policy stability is still an advantage over the current US policies, even if they lose some wage benefits.
This policy is actually doing exactly what it is suppose to. It is preventing more auto manufacturers from moving operations to Mexico or Canada where labor and Exchange rates are more favorable.
GM, FORD, Toyota, Honda, Chrysler all had their eye on moving more production to Mexico, this new agreement probably stops that.
I don't think anyone thought an auto manufacturer in Mexico would pull up shop and move to the US, that wouldn't make sense.
16$ an hour is less than what they pay in Canada.
Source: I work for a supplier in the Automotive Capital of Canada. These comments are so egregiously false.
It's the equivalent of 16. USD. So around 22. CAD?
I agree, nothing is moving to Canada (comment was more aimed at Mexico)I guess since you work for a supplier you heard of FORD probably closing down their Oakville Assembly plant since they are not assigning any vehicle production to that plant after they stop making the Edge and the Lincoln equivalent.
In GDP per capita Mexico ranks in front of 120 other nations, including: China, Turkey, Brazil, Argentina, Thailand, and just behind Russia. US imports are 1/3 of their economy; we're running a $100 billion trade deficit with Mexico, which is to their benefit. As an American I'm happy that we're doing that, it's to our benefit that Mexico's economy advances. It has the 15th largest economy in the world and continues to gradually climb. That's despite the intense domestic chaos they've been dealing with there the past ~13 years. As a developing nation their long-term economic potential is immense.
"Auto component maker Piolax, will also raise the hourly wage at its Mexican plant to $16 within the year. The company is also installing robots to mitigate rising labor costs, President Yukihiko Shimazu said."
There are obviously places where it makes sense, but a $15/hr human is preeeetty cheap compared to the price, programming, and maintenance of a robot.
Seeing the quote from Yukihiko, I feel it reads like PR or a soothing word to stockholders who hate to hear about employees and wages
But such a robot is a good insurance against further increases of minimum wages.
Also it's quite hilarious how quickly the reputation of the US has deterioated. The US is now being treated like an unreliable country.
"We don't want to be whipped around by a policy that we don't know how long it will last," said an executive at a Japanese automaker."
There is some broken thinking that high wages will increase consumer cost but replacing humans with cheaper robots won't, cherry-picking armchair cause-and-effect thinking to fit a "this is bad" narrative.
Reducing trade frictions forces economic equality, especially when that reduction is tied towards some equality metric, like wages.
Products being cheap because of economic disparity in trading partners isn't something to celebrate or bemoan the loss of. What is good for our neighbors is good for us. So many people are arguing from both sides at the same time.
The jaw of comparative advantage tells us that unrestrained trade benefits both parties. It means we get to deploy our workforce into higher value and higher paying jobs, while they get to increase their standard of living as well.
Although it's in vogue to hate on Biden for being old, out of touch, not progressive enough etc., this speaks to the effectiveness of his core political strategy - reaching across the aisle and building consensus. The system might not usually reward such behaviour, but it often leads to solutions that last.
Over the long term it will help drive automation which will lower the cost of cars and bring jobs to the countries with high levels of education and training.
All countries are unreliable. I'm sure FAANG feels the same about the EU.
The US has caused so much uncountable suffering with its middle east policy, half the country is obese due in part to taking advantage of the dollar reserve status, and its politicians with Wall St. sold out most of the American workers for a quick buck (now these workers are all killing themselves with drugs or from joining the military to protect other countries borders).
Reputation needs to drop much more to reflect the situation.
[0]https://www.cargroup.org/wp-content/uploads/2018/04/nafta_br...
And the employees who are left are highly paid engineers anyways.
That is: if auto workers are being paid that minimum wage by foreign automakers, that's gonna be a massive boon to Mexican household incomes, which improves the standard of living for at least some people, and in a dramatic way. This money will, I reckon, go straight toward things like entrepreneurship, higher education, and other things that help with upward mobility on a generational scale. This can (and I hope will) translate to less emigration pressure, since fewer Mexicans will feel the need to move north for US wages if they're already being paid US wages, and fewer migrants from further south will feel the need to continue across the US/Mexico border if they could instead settle in Mexico for similar pay and much lower cost of living. This could persist long-term, since a better-educated and more innovative population can give the Mexican economy one hell of a jumpstart (and, importantly, help whip up a generation of Mexicans with the technical education to keep up with the inevitable automation push).
I'm curious how this will play out long term, but it seems reasonable to me that we should pay workers according to the value they create rather than merely the cheapest employers can get away with paying (and contrary to what the far-capitalists might claim, these are rarely if ever in sync, especially when talking about outsourced labor; a worker in Mexico is not inherently worth different than a worker in the US, so why should those two workers be paid differently?), and I'm oddly optimistic about how this might play out.
If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
If they move to the US, they will be paying US levels of pay for both the cars they build for the US and Canada and the ones they build for the rest of the American continents.
Another disadvantage of building in the US cars for export to other countries that are not Canada or Mexico is they would have to worry about a trade war between the US and those other countries. If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
If it no longer saves them money to be somewhere else, it's good PR. You get to hang a huge "made in USA" flag on your dealerships.
> If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
People in the rest of the Americas buy different vehicle models. Chevy Beat, Nissan March, Volkswagen Vento. Very popular in Mexico.
The US market also just dominates the market on the entire continent. It has almost as many people as all of South America, but more importantly, they're the people who buy new cars. Many of those other countries not only have lower car ownership rates, a large fraction of their cars are used cars exported from the US market.
So they don't buy nearly as many new cars and most of what they do buy are different vehicle models.
> If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
This is assuming cars being assembled in Mexico are being exported in large numbers to the countries likely to get into a trade war with the US, which are predominantly on other continents. But the cars sold in those markets are typically also manufactured there. The Yaris is popular in Europe, they make them in France. The Buick Excelle is popular in China, they make them in Shanghai.
The Toyota Corolla is manufactured on six continents.
The cars they make in North America are mostly going to the US. And a trade war between the US and e.g. Costa Rica doesn't seem that likely, or if it somehow happened, that much of a concern for US auto manufacturing.
This is incredibly good news, if true. We need to reduce the number of cars in the US if we are going to have any chance of confronting climate change.
Remote working if it sticks might contribute more to car reduction.
This doesn't apply to electric cars, which do use dramatically less petroleum (i.e. none), but they're mostly already made in the US, so making petrol cars cost more may actually be an environmental advantage because more people will buy electric.