2024's Minimum Wage Shift in Mexico

As Mexico implements a significant 20% rise in minimum wages in January 2024, raising the daily pay from 207.44 pesos (US$12) to 248.93 pesos (US$14.22), US businesses near the border are reassessing their labor strategies. This change presents new considerations for companies contemplating the choice between Mexican and US labor. It was largely driven by Mexico's wage National Minimum Wages Commission (Conasami) and President Andrés Manuel López Obrador’s vision for economic equality in Mexico.

Economic Implications for Cross-Border Business

The wage hike, intended to reduce poverty, introduces potential challenges for businesses. With Mexico facing over 11% inflation, there's a concern that the increased labor costs might lead to higher product prices. For US companies near the border, this development necessitates a reevaluation of labor cost efficiencies in Mexico versus the United States.

Currency Strength and Cost Analysis

The appreciation of the Mexican peso against the US dollar complicates cost calculations for US businesses. This currency shift, influenced by high-interest rates and growing remittances, might diminish the cost-saving appeal of Mexican labor as imports become cheaper and domestic products less competitive.

US Labor and Municipal Incentives: A Viable Alternative

In light of Mexico's changing wage landscape, US labor near the border might emerge as a more stable and sustainable option. Notably, many US municipalities offer incentives for hiring local labor, which can significantly benefit businesses. These incentives often include tax credits, reduced property taxes, grants, and training subsidies. For example, programs like the Work Opportunity Tax Credit (WOTC) provide tax benefits to employers who hire from certain groups, including veterans and long-term unemployed individuals. Additionally, some regions offer customized training programs funded by the state or local government, designed to upskill workers specifically for the needs of a hiring company. These incentives not only reduce operational costs but also promote community development and ensure a skilled workforce.

At Scout - we partner with municipalities to provide the data and tools to help companies find the best location, workforce, and incentives to do business. 

Comparing Long-Term Stability

While Mexican labor might offer short-term cost savings, the long-term economic stability and predictability offered by US labor, coupled with municipal incentives, could be more advantageous for businesses considering relocation or expansion. These factors, combined with a stable economic and regulatory environment in the US, provide a compelling case for businesses to invest in American labor.

Forward-Looking Strategy

As businesses near the US-Mexico border adapt to the new economic realities post-Mexico's wage increase, weighing the pros and cons of Mexican versus US labor becomes crucial. The evolving economic conditions, potential cost efficiencies, and municipal incentives for hiring US labor must be carefully balanced in a company's strategic planning. The choice involves not just immediate financial considerations but also long-term operational stability and growth potential in a rapidly changing economic landscape.