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Monday, November 10, 2008

Is Mexico the new Detroit?

I can see why Mexican immigrants are anxious to sneak into the USA to make what Americans would consider "slave wages." As bad as those wages are they still beat what can be made in Mexico working in the auto industry. According to a recent AP story, Ford and GM have turned to Mexico for much of their manufacturing needs which has brought about a two tiered system of hiring because of the demands for cheap labor by the American companies. It sounds like the supply and demand law kicking in again.

Ford is forcing the auto union in Mexico to further decrease already low wages for new hires of $4.50 per hour to about half that as an incentive to get the business of building cars for them. As a comparison, the United Auto Workers tried a similar ploy last year in Detroit by offering their own two tier plan. However, their plan involved cutting starting pay in half from $28.40 per hour to about $14.20. Obviously, that is laughable as the jobs are mostly going to Mexico where $1.50 per hour with minor benefits is standard at some plants. Even China pays workers in foreign owned plants $2 to $6 per hour.

Meanwhile, GM has threatened to close one of their plants in Mexico because of slow sales. That may also be a ploy to lower wages. The immediate response of the auto union was to offer wage concessions to keep the plant open. The workers there make about $6 per hour, very high by Mexican standards. It looks like those "salad days" will be ending shortly.

Would you go to work in an auto plant in Mexico for $1.50 per hour? I made that much working part time in a grocery store in the mid 1960s. However, these days there is an abundance of young workers in Mexico who will flock to get hired under those conditions because of the supposed "stability" of such work. Juan Arreola, the Ford union leader, says "I guarantee that if we advertise for 2,000 workers, 10,000 are going to show up." Once again, supply and demand rules.

What does this mean to Detroit where second tier workers were offered a "low" $14.20 per hour? That is not close to being competitive with Mexico. Chrysler sales are down and layoffs are expected in Detroit. More jobs for Mexico?

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