Thursday, June 5, 2008

On cars (again) and NAFTA

Here are a couple of tidbits to augment the Ford Fiesta blog from the weekend.

First, GM announced earlier this week that they don’t need to continue to build more big trucks. They are closing four plants. In a great NAFTA gesture one is in Canada, one in Mexico, and two in the USA (including the Janesville plant).

Second, Mexico is mirroring the actions of the UAW. They are LOWERING wages for assembly workers to stay competitive with Asia. And more Mexicans all the time are asking the same question we are: “Where’s the benefit of NAFTA?”

For reference, the wage cut at Ford will put entry-level wages at about $2.25 an hour. Volkswagen is cutting starting wages to about $1.50 an hour.

NAFTA dictates that minimum wage rules are upheld, which is $5 a day in Mexico.

Benefits packages are cheaper in Mexico.

Unions in Mexico are limited to a plant, or in some cases a company. Unlike the UAW here, it is hard to cripple an industry with limited clout.

The main issue driving wages down is supply-and-demand. Mexico has about ONE MILLION young adults attempting to enter the workforce EACH YEAR. (Sadly, about half of them come here either legally or illegally.) It is an employers’ market in Mexico.

And although birth rates are dropping in Mexico, it will take over a decade to show the effects of the decline on the available labor pool. There’s no end it sight for cheap labor in Mexico.

And China is continuing to compete on the world market with cheap labor AND higher quality than Mexico. The US UAW worker isn’t even on the map at starting wages around $14.20 an hour plus a costly benefits package primarily attributed to feeding the health care industry and ambulance chasers.

Ain’t globalization great, folks? No wonder the politicians are so enamored with it!

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