Despite Fears, Mexico’s Manufacturing Boom is Lifting U.S. Workers

From: Natalie Kitroeff from www.latimes.com | August 21, 2016

Enrique Zarate, 19, had spent just a year in college when he landed an apprenticeship at a new BMW facility in San Luis Potosí, Mexico. If he performs well, in a year he’ll win a well-paid position, with benefits, working with robots at the company’s newest plant.

Within a decade or so, most of the BMW 3 series cars that Americans buy will probably come from Mexico, built by people like Zarate.

“When you start with such little experience, and get such a big salary, it’s unbelievable,” says Zarate, whose father is a taxi driver and whose mother is a housewife.
Enrique Zarate, 19, at a BMW training facility in San Luis Potosí, Mexico. (Joy Tirado / BMW)
Mexico is in the throes of a manufacturing boom.

Exports from Mexican factories have jumped 13% since 2012. The country already ranks as the seventh-largest producer of cars in the world, and Chrysler, Honda and Volkswagen have major operations there. Over the next five years, another wave of big automakers, including Ford, Audi and Toyota, plan to bring new plants online.

And it’s not just cars. Bombardier, Cessna and Hawker Beechcraft have opened aircraft assembly lines in Queretaro and Chihuahua, Mexico. Plastics and iron and steel exports have steadily risen.

In the process, workers like Zarate are being lifted into the middle class by the thousands.

That sounds like an exported version of the American dream, circa 1965, in places such as Dearborn, Mich., or Marysville, Ohio. Indeed, the influx of those types of jobs to Mexico has enraged Ford employees in Wayne, Mich., and the makers of furnaces in Indianapolis.

Donald Trump called the North American Free Trade Agreement “the worst trade deal in history.” Bernie Sanders said that an American company moving to Mexico is “the kind of corporate behavior that is destroying the middle class.” Even Hillary Clinton, who once praised the pact with Mexico, has expressed increasing skepticism about trade deals.

But despite what you might have heard on the presidential campaign trail, Mexico’s manufacturing surge has not been an unalloyed disaster for American workers.

U.S. manufacturing production, it turns out, is rising as well. Factory output has nearly reached its all-time high this year, and is up more than 30% since 2009.

Partly thanks to automation, factory jobs are still way off from their peak of more than 19 million in 1979. But they have been climbing slowly since the end of the Great Recession in 2009. Over the last six years, U.S. manufacturers hired 744,000 new workers, an uptick of 6%.

The bottom line, say economists and company executives, is that what’s good for Mexico’s factory workers is good for some U.S. workers too.

That’s because the chain of goods that supplies Mexico’s factories is very different from the one for China. Simply put, Mexico needs to consume a chunk of U.S. goods in order to make its own.

Around 40 cents of every dollar that the United States imports from Mexico comes from the U.S., compared with just 4 cents of every dollar in Chinese imports, according to the Woodrow Wilson Center. The influx of auto factories in Mexico might sustain hundreds of supplier jobs in Deforest, Wis., or Calhoun, Ga.

“Instead of thinking of Mexico as a separate part of production, it’s now part of our manufacturing process,” said Raymond Robertson, an economist at Texas A&M University. “Mexican companies aren’t just producing products that rival ours, they are producing parts of our products.”

The evolution of factory work in the United States, Mexico and China is illustrated by Evco Plastics, a family-owned, Wisconsin-based plastics maker.

Dale Evans, the owner of Evco Plastics, is not ashamed to admit that recently he’s been hiring more people in Mexico than in Wisconsin — or Dongguan, China.

In the last two years, Evco has added 100 people to its three Mexican plants, and has been hiring more slowly in its five U.S. facilities. Meanwhile, the company is shrinking two Chinese plants into one.

But Evans says that being able to give clients the option of getting their plastic parts made in Mexico more cheaply has allowed him to move much of his 500-member staff in Wisconsin and Georgia to higher-skilled tasks, such as programming robots.

“The easy things — people picking things up and putting them in boxes — that [work] left,” said Evans. It’s too expensive for him to employ rote manual laborers in America.

He has instead invested in training his employees to maintain huge, potentially dangerous robots handling plastic parts. “The difficult things you can do with machinery, that stayed.”

The shift is driven in part by labor costs.

Evans says he used to pay Chinese workers $1 an hour, but now pays them closer to $3 per hour. In Mexico, he says, he now pays a typical plastics assembler around $4 per hour, which is just a dollar more than what he paid when he first set up shop there in 2001.

“It’s just gotten cheaper in Mexico,” Evans said.

One of the workers who has benefited is Tania Berenice Salazar, a 25-year-old from Monterrey. The single mom was working as a cashier earning about $1.60 per hour before she got an entry-level job packing up plastic materials at Evco in 2012.

Now she supervises other packagers and makes about $1.80 per hour, even as the peso has plummeted. That’s significantly above the minimum wage in Mexico of around $4 per day.

“I feel that this is a step forward. I am rising, I am not stuck,” Salazar said.

As she spoke, two nearby plastic injection robots were loudly stamping out pieces of dashboards for Mexican-made Kia sedans and lamp fixtures. The drab Evco factory floor in Monterrey sounds like the inside of a washing machine.

U.S.-supplied raw materials account for 60% of the cost of the plastic incubators and ATV parts the company makes in Mexico. For Evco’s China plant, the figure is just 15%.

Evco’s experience supports the findings of several studies on the effects of NAFTA, which 22 years ago loosened barriers to trade among the U.S., Mexico and Canada.

Whereas China’s prowess in electronics and textiles appears to have made a lasting dent on U.S. manufacturing — costing up to 2.4 million jobs from 1999 to 2011, according to one study — trade flows with Mexico have been more balanced.

Multinational manufacturing companies hire an extra 250 U.S. workers for every 100 employees they bring on in Mexico, according to a 2014 study by researchers at the Peterson Institute for International Economics, a nonpartisan organization.

Dean Baker, the co-director of the left-leaning Center for Economic and Policy Research, was an early critic of NAFTA and continues to believe that “it put downward pressure on manufacturing wages” in America.

Still, he acknowledges that the pact had benefits, at least for U.S. corporations.

“It helped the competitive position of our automakers,” he said. NAFTA was “bad, but not as bad for U.S. workers as China.”

None of that research is any comfort to Frank Staples, who will lose his gig supervising an assembly line when Carrier moves 1,400 furnace-manufacturing jobs from Indianapolis to Monterrey, Mexico, by 2018.

Staples, who has worked at the company for 11 years, blames the move on “corporate greed.”

“I think NAFTA was one of the biggest screw-ups that has ever been put in place,” he said.

The 37-year-old father of three has been working with his hands — in demolition, then in warehouses, and now at Carrier’s factory — since graduating high school two decades ago. Now, for the first time, he’s genuinely worried about how he’ll support his family.

Staples said that anyone who says trade comes with more pros than cons has no idea what it’s like to be on the losing side of that equation.

“People can say what they want to say [about trade], but they aren’t experiencing it firsthand,” Staples said.

United Technologies, which owns Carrier, says the move reflects “the steady migration of the company’s competitors and suppliers to Mexico, as well as ongoing cost and pricing pressures driven in part by evolving regulatory requirements.” The company said it would pay for four years of traditional or technical education for laid-off employees.

The trade pact hit low-skill factory jobs hardest. Many garment manufacturers deserted Los Angeles for border maquiladoras in the 1980s and ’90s. Starting in the 2000s, though, some aircraft builders and carmakers, which were already firing up plants in the U.S. Southeast, followed in earnest.

Today, the United States has a $67-billion trade deficit with Mexico in cars and car parts, according to the National Assn. of Manufacturers.

There are no firm estimates on the total number of jobs that have migrated to Mexico. One study, from a liberal think tank funded by unions, found that a total of 851,700 positions were lost to Mexico in the wake of NAFTA. But several other nonpartisan reports have found that after factoring in jobs created by increased trade, the pact had little to no effect at all on employment.

Some factory work is returning to the United States, but jobs aren’t necessarily following. New generations of robots can do the work faster and more precisely than humans can.

Even in Mexico, with its lower labor costs, machines are replacing people.

At a new Kia factory in Nuevo Leon, Mexico, robots dominate the vast production spaces where the skeletons of Forte compacts take shape. The facility occupies an expanse of arid land that would comfortably accommodate three plants the size of Tesla’s main hub in Fremont, Calif.

In a welding area at the center of the assembly line, more than 300 automated machines work in concert with one another to fuse sedan doors to roofs and attach trunks to bumpers.

The towering robots are fenced off in playpen-like areas; workers rarely interact with them.Even when people are using their hands to, say, install a car hood, they are actually just guiding a machine holding the steel to the front of the car and pushing it forward until the piece slots in.“It’s so he doesn’t tire his back,” explained Victor Aleman, a spokesperson for Kia, watching as a welder pushed a massive machine toward the shell of a future Forte. Going forward, virtually all of the Forte sedans and hatchbacks purchased in the United States will be produced at this plant in Mexico, Kia said.“We are really happy because these workers don’t complain,” Aleman said, gesturing toward a sea of yellow robots that help this Kia facility produce a car every 54 seconds.A Mexican autoworker at the Kia plant earns $3.75 per hour, the company said. A typical auto manufacturer in the United States makes about $40 per hour, according to data from the Bureau of Labor Statistics.

But cheap labor south of the border hasn’t derailed Bernie Degenhardt’s career.

The father of two started working at Evco Plastics headquarters in Deforest, Wis., in 1986, when he was a sophomore in high school. He never left.

Degenhardt began as a machine operator, making about $5.50 an hour plucking plastic parts from an injection molding machine. He quickly realized that the influx of robots onto the factory’s floor might pose a threat.

“You want to be managing the new automation and technology, and not worried about ‘something is going to take my job away,’” Degenhardt says. So he got an associate degree in electronics, and then in 2006, a bachelor’s in mechanical engineering.

Today, Degenhardt earns around $120,000 per year as the plant’s automation manager, supervising about 20 people.

At Evco’s Wisconsin plants, robots do the work Degenhardt once did, pulling just-made plastic from its mold.

“The robots do my [old] job, and I am managing people that manage them,” he says.

Credits: Lily Mihalik and Andrea Roberson

Help Companies Navigate International Hiring Challenges

By: Veronica Scrimshaw, NPA Worldwide

Today’s guest blogger is Narissa Johnson, the global brand and content manager of SafeGuard World International. For nearly a decade, organizations around the world have relied on SafeGuard World for their global HR needs, specifically around payroll and employee compliance. SafeGuard World is an Alliance Partner of NPAworldwide.

To succeed, companies will come to recruiters like you to find and hire the best talent, no matter where they live. Successful recruitment of global talent means finding the right talent and ensuring your client is able to get them working quickly. You are in a unique position to inform your clients of the risks involved with international hiring.

Social Costs
Social costs are usually made up of statutory benefits and insurance. Statutory benefit requirements, such as healthcare, vary by country. To employ legally, you must understand the required level of benefits.

The range of social costs differ drastically from country to country. If operating in the UAE, for instance, they are around 0% and in Brazil, employers pay from 60% to 120% of an individual employee’s total compensation (collective bargaining agreements, full private healthcare or full life insurance).

Liability Insurance
An employer’s liability insurance provides protection for their workers. While not all countries have a state-mandated plan, companies generally set up their own liability insurance to protect the worksite and workers. This ensures the company’s legal protection but also impacts its culture, assuring employees that they are being treated equally and fairly, regardless of where they work.

Minimum Wage and Collective Bargaining
As with most issues of remuneration, minimum wage is measured differently depending on the country. In Germany, minimum wage is measured hourly, while in Taiwan it’s measured annually.

Collective Bargaining Agreements (CBA) contain terms and conditions that set HR and payroll standards for workers. CBAs vary widely – when recruiting in foreign markets, it’s essential to understand these differences.

Paid Time Off
Paid time off (PTO) is particularly challenging when hiring internationally. For example, some countries federally mandate minimum PTO. However with CBAs, some positions may have additional requirements. Offering additional days off can also be a useful recruiting tactic. Having the right local knowledge will inform your PTO pitch.

Paid Family Leave
Family leave requirements aren’t consistent across the globe and the amount of leave may differ depending on the employee’s position and seniority. Your client shouldn’t only satisfy legislative requirements but also conform to local customs and expectations. Again, this is an opportunity to leverage leave in offer negotiations.

Termination Policies and Practices
Outside of the U.S., “at-will employment” is rare; companies operating in foreign markets must be aware of the differences in termination policies to avoid non-compliance. While finding the perfect candidate for your client is important, understanding unique termination policies and practices will protect them from the unforeseen.

While the world isn’t getting smaller, our ability to erase international borders certainly makes it feel that way. This is good news for recruiters and companies that understand the best talent isn’t always in their home country. Understanding global employment issues will ensure companies can make smart hires and focus on their core business.

5 Steps to Rev Up Your Job Search in 2016

By: Challenger, Gray & Christmas

The job market is expected to keep improving in 2016 thanks to strong growth across many sectors, including health care, technology, manufacturing and construction. However, the fact that many metropolitan areas are already approaching full employment does not mean that finding a job will be easy.

In its annual job market outlook, global outplacement consultancy Challenger, Gray & Christmas, Inc. indicated that 2016 would continue to see high levels of workplace churn, meaning increased hiring amid ongoing layoffs.

“Workforce reductions are a part of the employment fabric now. We see layoffs even when the economy is flourishing. It could be a single industry, such as energy, which saw several years of expansion only to reach a point where there was more oil than we needed, leading to a massive price drop followed by widespread job cuts. It could be a single company going in a new direction or streamlining its operations,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“At the same time, we are seeing a very strong hiring environment in the coming year. Many industries are growing, companies are replacing retiring workers and new businesses are being established. Each month, about five million Americans are hired and employers report that there are still more than five million openings. There is tremendous potential out there,” he said.

“But, even in the strongest economy, finding a job is never easy. Those who believe they can simply send out a bunch of resumes and sit by phone waiting for it to ring with offers will be sorely disappointed. The job search requires a lot leg work to uncover the best opportunities. It requires networking, cold-calling, interviewing and the ability to persist in the face of rejection,” said Challenger.

For those entering the job market for the first time, those reentering the market, as well as for those in-between jobs or seeking to change jobs, Challenger offered the following steps to improve your chances for job search success in the new year.

Get involved with community service group. This is a great way to build your network as well as hone your professional skills.

Join a professional/trade association. These organizations can provide training and education opportunities and most hold several networking functions every year. The dues are worth their weight in gold if you meet a person at an event who can help you find a new job.

Have lunch with at least one new contact each week. Obviously, networking is an essential part of finding a job. But blindly adding new people to your LinkedIn contacts list, where they will likely just collect dust, is entirely ineffective. It is vital to meet with people on a regular basis. Lunch or even over coffee is an ideal setting, because it is more relaxed. Building these relationships may help you in your job search.

Rev up your skills. Employers want to know that you are up on the latest skills, trends, advances, etc. While some employers will foot the bill for continue education, the number who do so is shrinking. And, if you are between jobs, no one but yourself can ensure that your skills are up-to-date. Explore online courses and local certificate programs to broaden your industry knowledge, increasing your marketability to a variety of employers.

Look beyond your industry. Just because you have been working in the same industry for a certain number of years, does not mean that you must stay in that industry. Your fundamental job function is the primary skill set you are selling to employers, not your knowledge of a specific industry. Your skills as an IT professional in the financial industry are certainly transferable to the health care industry, for example. Job seekers can greatly expand their chances of success by expanding the number of industries in which they seek opportunities.

More Hiring, Fewer Layoffs Forecast for 2016

By Roy Maurer (www.shrm.org) – 12/29/2015

The labor market experts at Challenger, Gray & Christmas Inc. forecast fewer layoffs, more hiring and increased wages in 2016.

U.S.-based employers announced 574,888 job cuts for the year through November 2015, already far surpassing the 2014 year-end total (483,171) and setting up for the largest year-end total for job cuts since 2009, when 1.2 million job cuts were announced.

The rise in job cuts this year was due primarily to the dramatic decline in oil prices and heavy downsizing in the public sector, according to John A. Challenger, chief executive officer of Challenger, Gray & Christmas, based in Chicago.

Falling oil prices resulted in 102,738 job cuts through November, representing nearly 20 percent of job cuts announced in 2015. Military cutbacks claimed another 57,000 personnel.

“With oil prices expected to remain low for the foreseeable future, we could continue to see the industry workforce shrink in 2016, though probably not at the rate we saw in the first part of 2015,” Challenger said.

Challenger is predicting that fewer layoffs in the energy sector will result in an overall slowdown in downsizing activity in 2016. He’s also forecasting increased hiring and wages.

The nation’s payrolls grew by an average of 210,000 jobs per month in 2015 through November, according to the Bureau of Labor Statistics. That’s down from the 260,000 new jobs averaged per month in 2014.

“Part of the slowdown in job creation last year may have been related to a weakened energy sector, which was one of the strong growth areas in 2013 and 2014. However, another contributor to the slower job gains this year may have been a shrinking supply of available talent,” said Challenger.

The national unemployment rate is 5 percent, which many economists consider full employment. When broken down to include just those ages 25 and older, the rate drops to 4.1 percent. For those with a four-year college degree, the rate is 2.5 percent.

“An unemployment rate of 2.5 percent means that employers seeking college-educated, experienced workers are really struggling right now to find candidates to fill openings,” Challenger said.

According to the latest Bureau of Labor Statistics data on labor turnover, the nation’s employers hired 5.1 million new workers in October 2015 and there were still nearly 5.4 million job openings at the end of the month.

“We expect this heavy churn to continue in 2016,” Challenger said. “Around 10,000 Baby Boomers hit retirement age each day. That doesn’t mean they are going to leave the labor force. However, many will change jobs, others will cut back hours, and some may leave the workforce for a while and come back.”

All of this churn creates hiring opportunities. “Employers will have to increase their recruiting efforts to find the best candidates,” Challenger said. “They will have to rely more heavily on referrals from current employees. They will have to be more open to considering candidates who might have longer-than-desired gaps on their resumes or whose skills and experience do not perfectly align with the job opening. We could see starting salaries increase, as well as the salaries of existing workers, as employers try to attract and retain the best talent.”

Roy Maurer is an online editor/manager for SHRM.

Follow him @SHRMRoy

US, Mexico are ‘Rising Stars’ in Manufacturing Cost Competitiveness

When it comes to where to site a factory for manufacturing competitiveness, be prepared to throw the old stereotypes out the window.

Over the past decade, the U.S. and Mexico have become “rising stars” among the top 25 export economies while China and Brazil are among the countries that have seen their cost advantages erode significantly, new analysis by the Boston Consulting Group shows. Overall costs in the U.S. are 10% to 25% lower than those of the world’s 10 leading goods-exporting nations with the exception of China. Continue reading

Significant Tax, Social Security Reforms to Impact Employment in Mexico

Major legal reforms have recently been approved while others are still under discussion that will significantly impact employers in Mexico and in some specific cases, will considerably increase the cost of formal employment.

Provisions in the Income Tax Law have been modified and amendments are expected in the Social Security Law as well. In particular, the modification to the “base quotation salary” for the payment of social security contributions and an increase on the quotas for the illness and maternity branch of insurance. In addition, new legislation is under discussion at the Congress, establishing for the first time in Mexico the creation of unemployment insurance and a universal pension, tending to grant minimum financial benefits to individuals over 65 years old, who do not have a pension or social security system benefit. Continue reading

Brazil Economic Growth Slow in 2014: IMF

RIO DE JANEIRO — Despite it playing host to the World Cup, Brazilian growth will continue at a slow pace in 2014, the IMF said in its quarterly report Tuesday.

The international lender lowered its annual growth forecast to 1.8%, compared to 2.3% in January.

Growth will be slower than once expected because of weak infrastructure and low private investment reflecting a lack of confidence in industry, the International Monetary Fund said. Continue reading

Making the Most of Expat Assignments

Companies lack an effective process for maximizing the benefits of international work. For best results, tie talent management and global mobility together.

Michael Kannisto has his house in order when it comes to expats.

As director of talent management and talent acquisition at manufacturer JLG Industries Inc., he has created a practice for expatriate assignments that maximizes the potential of its global workforce. His secret? Integrating talent acquisition, development and global mobility. Continue reading