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The Mexican Labor Market Tightens

Walter Russell Mead

Wages are rising in Mexico. This is good news for everyone. The Wall Street Journal reports:

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 firm Roland 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 Mexican birth rate has been steadily dropping since 1974, population growth has slowed, and now wages are rising. People focused on Mexico as the great source of future immigration to the U.S. are spectacularly missing the point.

That’s good for the United States: rising wages and a growing middle class in Mexico well help to stabilize an important neighboring country. Mexico has had and still has many problems—drug gangs, deep-seated corruption, poorly functioning state institutions and a history of violence and inequality. But over the last 20 years, Mexico has largely moved forward: a peaceful end to decades of one party rule, an opening of the economy, and a greater integration into the North American market.

Over time, Mexico will have to adjust: automation is going to create problems for Mexican factory workers, and low wage competition from other countries will heat up as Mexican wages rise.

But in a world in which bad news comes hard and fast, it’s important not to lose sight of the progress that is still taking place.

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