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Labor competition is pushing up wages
Automotive industry offers bonuses, soccer fields, cowboy boots to attract workers
Mexico News Daily | Thursday, August 18, 2016
A 4% increase in pay and benefits for workers at Volkswagen’s automotive assembly plant in Puebla may seem generous in relation to an inflation rate running at less than 3%, but other manufacturers are offering even larger increases.
The report on the new agreement between Volkswagen and its employees didn’t say what actual salaries are but there are indications that if they’re not high enough, workers will go elsewhere.
The new Kia Motors plant in Nuevo León, for example, is paying an average salary that is the equivalent of US $7,200 a year, about 130,000 pesos, according to spokesman Victor Alemán, quoted in a report this week by the Wall Street Journal.
Another Nuevo León manufacturer, a supplier of automotive parts, is seeing 10% employee turnover, for which it blames Kia. When one of its engineers said he was leaving to work at the South Korean firm’s Monterrey plant, he was offered a 30% pay increase.
It wasn’t enough to prevent his departure.
Cheap and plentiful labor has been the big lure for the auto makers who have flocked to Mexico in recent years, investing billions of dollars in assembly plants. But competition for employees is now pushing up labor costs which, according to the Journal, have risen by double-digit percentages at some factories in recent years.
Retirement plans, bonuses, English classes, soccer fields and even cowboy boots are among the additional perks being offered to lure workers, particularly by auto parts manufacturers.
“We have a huge supply gap in Mexico that needs to be resolved,” said Stephan Keese of the 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 Journal reported it had reviewed an employment contract for Ford Motor Company’s new plant in San Luis Potosí, scheduled to open in 2018 and hire 2,800 workers. Wages will run between $1.15 and $2.30 per hour, somewhat less than what Kia is paying but amounts that were reported to be on a par with other plants.
Ford is also offering life insurance plans and contributions to employees’ savings plans.
For Volkswagen, recruiting problems are temporary, turnover is manageable and salaries competitive. “There are enough people willing and eager to work,” said Thomas Karig, vice-president of corporate affairs in Mexico.
The company’s new Audi plant in San José Chiapa, Puebla, will begin production this year. The company said 230,000 people applied for the plant’s 4,200 jobs.
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