Japan auto companies triple Mexican pay rather than move to US(asia.nikkei.com)
asia.nikkei.com
Japan auto companies triple Mexican pay rather than move to US
https://asia.nikkei.com/Business/Automobiles/Japan-auto-companies-triple-Mexican-pay-rather-than-move-to-US
120 comments
Wow, this should at least provide for some very interesting natural sociological experiments. For context, I make less than this as a software developer in Chile, and still have no problems saving and living a comfortable lifestyle. This is going to significantly impact the lives of folks working in these factories, and it will be interesting to see how it will affect the individuals, their communities, and the quality and competitiveness of the factories.
That's assuming it lasts. When you already have a factory in Mexico and now you have to pay them $16/hour, it makes little sense to immediately move it back to the US just in order to save $0 by paying US workers $16/hour instead.
But the next thing that happens is that it becomes more cost effective to automate, so you start considering that. Then you don't employ as many people, and they become skilled workers who maintain high tech robots instead of unskilled workers turning wrenches, so you're not actually paying unskilled workers $16/hour anymore.
Meanwhile the automation requires retooling, and maybe then you evaluate whether to retool the existing factory or to build a new one in a place with more skilled workers who can maintain the robots.
In year zero you just raise wages for the existing workers. In year two or five or ten, something else happens.
But the next thing that happens is that it becomes more cost effective to automate, so you start considering that. Then you don't employ as many people, and they become skilled workers who maintain high tech robots instead of unskilled workers turning wrenches, so you're not actually paying unskilled workers $16/hour anymore.
Meanwhile the automation requires retooling, and maybe then you evaluate whether to retool the existing factory or to build a new one in a place with more skilled workers who can maintain the robots.
In year zero you just raise wages for the existing workers. In year two or five or ten, something else happens.
> But the next thing that happens is that it becomes more cost effective to automate, so you start considering that.
Economically that is always the desired direction, but not because people cost too much. Changes to automation are incredibly expensive to build. The benefits to increased automation are increased output volume and improved quality control.
Any cost reductions that arise are almost always completely unintended. To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product. You have to consider things like marketing, regulation, distribution, and so forth that do not benefit from the same automation efforts.
Economically that is always the desired direction, but not because people cost too much. Changes to automation are incredibly expensive to build. The benefits to increased automation are increased output volume and improved quality control.
Any cost reductions that arise are almost always completely unintended. To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product. You have to consider things like marketing, regulation, distribution, and so forth that do not benefit from the same automation efforts.
> Any cost reductions that arise are almost always completely unintended.
Nonsense. Are you trying to argue that computers are not an intentional cost savings over floors full of accountants using pen and paper? That a loom costs more than the labor required for hand weaving? Or that businesses don't realize that they are?
> To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product.
Hardly any manufactured product is genuinely long-term supply constrained. Output volume increases as a result of higher demand. Higher demand comes from lower prices. If automation isn't lowering prices then it isn't increasing output volume.
Nonsense. Are you trying to argue that computers are not an intentional cost savings over floors full of accountants using pen and paper? That a loom costs more than the labor required for hand weaving? Or that businesses don't realize that they are?
> To the contrary increased automation actually raises costs directly proportional to changes in market pressure from the increased output volume and any supply chain changes that increase access to the product.
Hardly any manufactured product is genuinely long-term supply constrained. Output volume increases as a result of higher demand. Higher demand comes from lower prices. If automation isn't lowering prices then it isn't increasing output volume.
> Are you trying to argue that computers are not an intentional cost savings over floors full of accountants using pen and paper?
Yes. The key word there is intentional.
> Output volume increases as a result of higher demand.
Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
Yes. The key word there is intentional.
> Output volume increases as a result of higher demand.
Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
> Yes. The key word there is intentional.
You're basically arguing that businesses are run by people who can't compare numbers to each other.
If automation costs less, as it often does, then businesses will adopt it because it costs less, because lowering costs increases margins (or volumes, if the lower costs are passed on).
> Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
Not indirectly. If there is demand for 5000 cars at a given price and you suddenly gain the capacity to manufacture 10,000 cars at that price, you still aren't going to manufacture 10,000 cars unless you expect somebody to buy them. Having the capacity without the demand is nothing.
And having the demand without the capacity would only cause businesses to expand capacity, whether through automation or otherwise. If it was profitable to make 5000 cars by hand and there is demand for 10,000 cars at that price then they would just hire twice as many people to make them if nothing else.
You're basically arguing that businesses are run by people who can't compare numbers to each other.
If automation costs less, as it often does, then businesses will adopt it because it costs less, because lowering costs increases margins (or volumes, if the lower costs are passed on).
> Indirectly. Output directly increases from higher production capacity. Wishful thinking and consumer desire do not transform manufacturing without some changes to that manufacturing.
Not indirectly. If there is demand for 5000 cars at a given price and you suddenly gain the capacity to manufacture 10,000 cars at that price, you still aren't going to manufacture 10,000 cars unless you expect somebody to buy them. Having the capacity without the demand is nothing.
And having the demand without the capacity would only cause businesses to expand capacity, whether through automation or otherwise. If it was profitable to make 5000 cars by hand and there is demand for 10,000 cars at that price then they would just hire twice as many people to make them if nothing else.
Automation in almost every case costs substantially more, but frequently results in a lower cost per unit. Comparing variable numbers is algebra but this is a calculus problem.
> Automation in almost every case costs substantially more, but frequently results in a lower cost per unit.
Which is why you amortize the up-front cost over the expected number of units adjusted for time value of money. In which case the automation often still results in lower overall costs.
> Comparing variable numbers is algebra but this is a calculus problem.
Calculus still leads to comparing numbers. Businesses know how to do calculus.
Which is why you amortize the up-front cost over the expected number of units adjusted for time value of money. In which case the automation often still results in lower overall costs.
> Comparing variable numbers is algebra but this is a calculus problem.
Calculus still leads to comparing numbers. Businesses know how to do calculus.
Algebra results in numbers. Calculus results in functions. Businesses that plan well know when not to invest in automation changes.
> Yes. The key word there is intentional.
In what universe is replacing floors full of accountants with a room full of computer(s) anything other than intentional?
"Oh, whoops, we bought these computers on a whim, and now all of a sudden all but a fraction of these accountants are completely redundant! Total accident, who would've guessed it?"
In what universe is replacing floors full of accountants with a room full of computer(s) anything other than intentional?
"Oh, whoops, we bought these computers on a whim, and now all of a sudden all but a fraction of these accountants are completely redundant! Total accident, who would've guessed it?"
There is an entire world of books covering this about Toyota. Automation doesn't translate in lower costs necessarily.
Higher production volume means more material purchased, increased warehouse costs, people hired for warehousing, and everything related.
So it all depends on the organization.
Higher production volume means more material purchased, increased warehouse costs, people hired for warehousing, and everything related.
So it all depends on the organization.
The notion that car manufacturers from all the industries out there haven't already automated anything that's worth automating is something that I can't understand.
"Worth automating" isn't a simple one-time binary decision. Whether a given process is worth automating depends on the cost of automating it, and the labor costs that it will save, both of which change over time.
Japanese manufacturers at least have had similar if not higher costs on manufacturing in Japan( and Europe). And these factories still employ a large number of skilled and non-skilled workers.
I don't think a bump in salaries that puts a country in the same ballpark as existing manufacturing locations( not counting the extra costs of manufacturing in the States or in Europe) is going to be such a big push for more automation. After a certain point the versatility of human workers is still useful.
I don't think a bump in salaries that puts a country in the same ballpark as existing manufacturing locations( not counting the extra costs of manufacturing in the States or in Europe) is going to be such a big push for more automation. After a certain point the versatility of human workers is still useful.
It needs to be understood that any kind of new engineering project has a risk of failure, often quite high. For example, in software, there's the infamous CHAOS report from the Standish Group that comes out every couple of years. A casual Google for the 2018 results has this quote from someone with a copy (https://hennyportman.wordpress.com/2020/01/03/review-chaos-r...)
> "The Standish Group started with a traditional metrics of success by looking at: “on time, on budget, and on target”. This means in this CHAOS Report 2018 for the year 2017: successful: 36%, challenged: 45%, failed: 19%. If they use their “modern” definition of success: “on time, on budget, with a satisfactory result.” You get almost the same results (33%, 48%, 19%)."
So, about 1/3 of IT projects are successful, including being on-time and on budget, and about 1/5 are total losses that fail to deliver any value at all. Not great odds and I'd expect the numbers are likely to be broadly similar in other engineering fields.
The decision on whether or not to embark on an engineering project (and whether to do it in-house or hire a third party) is among the most challenging duties executives have.
> "The Standish Group started with a traditional metrics of success by looking at: “on time, on budget, and on target”. This means in this CHAOS Report 2018 for the year 2017: successful: 36%, challenged: 45%, failed: 19%. If they use their “modern” definition of success: “on time, on budget, with a satisfactory result.” You get almost the same results (33%, 48%, 19%)."
So, about 1/3 of IT projects are successful, including being on-time and on budget, and about 1/5 are total losses that fail to deliver any value at all. Not great odds and I'd expect the numbers are likely to be broadly similar in other engineering fields.
The decision on whether or not to embark on an engineering project (and whether to do it in-house or hire a third party) is among the most challenging duties executives have.
Toyota and Tesla found out the hard way that a lot of tasks can't be automated. Robots are still very very very dumb.
Tesla tried to go 100% automated and failed.
Those factories are just going to move out of the NAFTA area, assuming Biden doesn't win and undo everything Trump's done.
Isn't the point of the agreement that the terms are better than what you get in other areas? It doesn't help to move to China if cars from China are subject to even higher tariffs than cars made for less than $16/hour in Mexico.
Similar situations happen in many places around the world.
Factory workers are usually not well educated and they don’t handle money well.
A perfect example is Alberta oil sands. Many workers are extremely well paid. Most of them just spend everything and manage to get in debt with lavish lifestyle. Buying expensive cars, toys, large houses. They end up without any significant net worth and now are also hostage of their lifestyle.
There’s a term for that: lifestyle inflation.
Factory workers are usually not well educated and they don’t handle money well.
A perfect example is Alberta oil sands. Many workers are extremely well paid. Most of them just spend everything and manage to get in debt with lavish lifestyle. Buying expensive cars, toys, large houses. They end up without any significant net worth and now are also hostage of their lifestyle.
There’s a term for that: lifestyle inflation.
Or probably because they know that even in the worst case scenario they will not go hungry or lack healthcare access. This is so contrasting with India or other Asian countries where opportunities and wealth was always limited and welfare net was limited to your family and social circle which helped in dire times, this led to a very strong savings culture for the middle class.
Who handles money well? This is not true. I live in a Third world and the educated are the most wasteful. They want to show class and style. They live far above their means.
Paying these factory workers what they are worth, regardless of where they are situated, has been a long time coming. This is great news.
In your mind, what is the worth a laborer? How does a company determine it?
You are getting payed less than $16/hour?? As a software developer? Man you are getting ripped off.
My advice is to seek for opportunities overseas, or even in your country. For context I live in Ecuador.
My advice is to seek for opportunities overseas, or even in your country. For context I live in Ecuador.
To give you some context about how migration can impact salary: I made this spreadsheet during 2018 when I was trying to make a case for a raise that never happened.
https://drive.google.com/file/d/18D1aAM0bTx4vLSDonpImtIfYR4T...
In 2019 I resigned from my previous employer (an American company growing fast and short of 1000 employees nowadays). I moved to the Netherlands to work on a startup (that pays average for the Netherlands).
If you check my website (https://henvic.dev/) you can see it's not like I was inexperienced.
I was told the major reason why my request for a raise was denied was that my salary was great for where I lived in Brazil (northeast, which is poorer than São Paulo and Rio de Janeiro).
I considered the work I was doing worth way more. I started looking for new opportunities and asked to quit. This is not uncommon at all. Most of my colleagues in the tech field that are average or better have eventually moved abroad for money or started working remotely for a company overseas. Working for a company in a poor country where it has a local presence is almost always a sentence to getting paid less than you're capable of elsewhere or doing remote work.
In 2019 I resigned from my previous employer (an American company growing fast and short of 1000 employees nowadays). I moved to the Netherlands to work on a startup (that pays average for the Netherlands).
If you check my website (https://henvic.dev/) you can see it's not like I was inexperienced.
I was told the major reason why my request for a raise was denied was that my salary was great for where I lived in Brazil (northeast, which is poorer than São Paulo and Rio de Janeiro).
I considered the work I was doing worth way more. I started looking for new opportunities and asked to quit. This is not uncommon at all. Most of my colleagues in the tech field that are average or better have eventually moved abroad for money or started working remotely for a company overseas. Working for a company in a poor country where it has a local presence is almost always a sentence to getting paid less than you're capable of elsewhere or doing remote work.
Yes I guess this makes sense, although salaries here in Ecuador can be a little more competitive at least for developers with more experience. They are still way lower than 1st world countries.
Anyways, I think moving jobs is the best way to push for a raise, no matter where you live.
Anyways, I think moving jobs is the best way to push for a raise, no matter where you live.
Why move production to the US and pay more when you can just leave it where it is and pay more? This seems reasonable.
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> The US-Mexico-Canada Agreement requires 40% or more of parts for each passenger vehicle be manufactured by workers who are paid at least $16 per hour...
On face value this seems to be a very progressive condition.
On face value this seems to be a very progressive condition.
It's kinda two ways. It raises the cost of automobiles (that's why analyses project a reduction in automobile sales by a bit over a million vehicles per year), reduces labour demand, and erases more low-skilled work; but those who do get the jobs may be paid more than otherwise, until the numbers expire.
Doesn't it also reduce the incentive to outsource jobs overseas? It's harder for lower-skilled jobs in the US to compete with overseas workers working for less than minimum wage.
If wage is the only cost, sure. But it's not, and hiring a mexican metalworker at $16/hr is still cheaper than hiring an american metalworker at $16/hr
But is it cheaper than hiring an American metalworker at $8/hr?
It also makes American workers start to ask questions about why it's so much cheaper to pay a Mexican worker "the same amount" and whether or not the things that money buys are worth what it's costing them.
It also makes American workers start to ask questions about why it's so much cheaper to pay a Mexican worker "the same amount" and whether or not the things that money buys are worth what it's costing them.
The problem is that the $16/hr is an attempt to say 'not mexico!' without being discriminatory, so it doesn't say 'non-US workers at $16/hr' it says, essentially 'workers must be paid $16/hr or more', and the result is you'd have to pay US workers $16/hr to meet the same criteria, or else cars produced 100% in the US would fail to be legal.
That's assuming corporations are too dumb to figure out how to get their other costs counted as part of the $16/hour.
For example, one of the major costs in the US is employer-subsidized health insurance, and employers subsidize it because it's tax advantaged. If they instead paid the employees more only to have the employees use the money to buy health insurance, the employees would pay more taxes. But they could still do it -- pay more and then offer a health plan with no employer subsidy. And then they're paying you "$16/hour" even though you lose half of it to health insurance premiums (and then even more to tax).
And if that got people asking why they pay tax on their health insurance when they buy it themselves, or why health insurance costs so much in the US, all the better.
For example, one of the major costs in the US is employer-subsidized health insurance, and employers subsidize it because it's tax advantaged. If they instead paid the employees more only to have the employees use the money to buy health insurance, the employees would pay more taxes. But they could still do it -- pay more and then offer a health plan with no employer subsidy. And then they're paying you "$16/hour" even though you lose half of it to health insurance premiums (and then even more to tax).
And if that got people asking why they pay tax on their health insurance when they buy it themselves, or why health insurance costs so much in the US, all the better.
> And if that got people asking why they pay tax on their health insurance when they buy it themselves, or why health insurance costs so much in the US, all the better.
Or it might just lower the compensation package that autoworkers get and make other industries more attractive by comparison.
Employees that want to know can already figure out what their employer pays for. Health insurance tax subsidies have massively distorted the health insurance markets for decades and there is more access to this knowledge than ever before, but there have been no major efforts to reform this and sever health insurance from company sponsorship.
That said, I think that would be one of the best things we could do to lower health care costs quickly -- force all employers to shift their health insurance to the employees and increase their pay by the cash equivalent.
Or it might just lower the compensation package that autoworkers get and make other industries more attractive by comparison.
Employees that want to know can already figure out what their employer pays for. Health insurance tax subsidies have massively distorted the health insurance markets for decades and there is more access to this knowledge than ever before, but there have been no major efforts to reform this and sever health insurance from company sponsorship.
That said, I think that would be one of the best things we could do to lower health care costs quickly -- force all employers to shift their health insurance to the employees and increase their pay by the cash equivalent.
> Employees that want to know can already figure out what their employer pays for.
That's not how humans work. The fact that information is available on the internet doesn't mean that people are actively going to go out and look it up. But if you send them a huge bill for something every month, they're going to look at it and ask WTF.
That's not how humans work. The fact that information is available on the internet doesn't mean that people are actively going to go out and look it up. But if you send them a huge bill for something every month, they're going to look at it and ask WTF.
> It raises the cost of automobiles (that's why analyses project a reduction in automobile sales by a bit over a million vehicles per year)
What do new cars cost in the US? Does a price difference of $500 or $1000 really make someone say "all right, I'd rather do without a car"?
What do new cars cost in the US? Does a price difference of $500 or $1000 really make someone say "all right, I'd rather do without a car"?
Yes. Of all the people considering buying new cars, there are some at the margin of buying or not buying.
Beyond that it seems more than reasonable, when the average cost of a new vehicle is in the 30k range or whatever it is these days, a difference of 500 or 1000 dollars like the parent comment gives as an example is a solid couple or few percent of the cost of the vehicle, almost by definition that will make or break around the same percentage of sales.
If you finance the car, that extra cost about extra ~$10/m
That's not exactly true. There are always near-substitutes.
If you can't afford a new Honda sedan you can: (1) look towards a Hyundai sedan, (2) look towards financing the same car for another year (which is why 7 year financing plans are common in the USA in the last decade), or (3) look at a used car.
A $500 cost difference between this month and next month means you may consider spending another $500+ on maintenance to keep your existing car running longer, but if you get into a place where your current car is no longer usable, there are several options before you have to forgo having a car altogether.
If you can't afford a new Honda sedan you can: (1) look towards a Hyundai sedan, (2) look towards financing the same car for another year (which is why 7 year financing plans are common in the USA in the last decade), or (3) look at a used car.
A $500 cost difference between this month and next month means you may consider spending another $500+ on maintenance to keep your existing car running longer, but if you get into a place where your current car is no longer usable, there are several options before you have to forgo having a car altogether.
It might boost the sales of cheaper cars. Americans buy lots of big cars. Also Americans make use of mostly new cars. In places where cars are expensive, the roads look like an American's cars junkyard.
Yes, when prices rise, demand lowers as a continuous function.
It's not like nothing happens until it's an $800 difference and then there is "quantum leap" change.
It's not like nothing happens until it's an $800 difference and then there is "quantum leap" change.
> Does a price difference of $500 or $1000 really make someone say "all right, I'd rather do without a car"?
The answer to this is obviously yes if you think about it (assuming you're talking about deciding against buying a new car specifically). The question is how many people?
The answer to this is obviously yes if you think about it (assuming you're talking about deciding against buying a new car specifically). The question is how many people?
My guess is no, but it might make someone say "all right, I'd rather get a used car".
And person a getting a used car might make person b who was going to get a used car not get a car at all (or get a lower quality used car making person c...).
Also it might make some families go "all right I won't get a 2nd (or nth) car".
Also it might make some families go "all right I won't get a 2nd (or nth) car".
It also changes the math when you have an old car in need of repair and have to decide whether to fix it or replace it.
I wonder how you even calculate that?
Is a single screw a part? Is the whole engine a part, or made of lots of parts? How far do you break each thing down until it’s a single part? Is it when it can’t be taken apart without cutting something? Could you get past that rule by just welding the things made by cheap workers together? So they are no longer seperate parts?
I have so many questions.
You could say 40% vehicle parts by mass but that doesn’t seem to capture the intent well either.
Is a single screw a part? Is the whole engine a part, or made of lots of parts? How far do you break each thing down until it’s a single part? Is it when it can’t be taken apart without cutting something? Could you get past that rule by just welding the things made by cheap workers together? So they are no longer seperate parts?
I have so many questions.
You could say 40% vehicle parts by mass but that doesn’t seem to capture the intent well either.
It's based on the value, here is more info (chapter 3)
https://www.wita.org/wp-content/uploads/2019/04/190403_Schol...
Obviously, nobody is going to move a state of the art facility that cost billions just because their labor costs went from 'nothing' to 'almost nothing.'
What it will do is prevent more things from leaving the US to go to Mexico.
Me being a cynic, I'm fully expecting the employees will have to return some of that cash via forced employee dormitories and such, but we'll see.
What it will do is prevent more things from leaving the US to go to Mexico.
Me being a cynic, I'm fully expecting the employees will have to return some of that cash via forced employee dormitories and such, but we'll see.
Plus paying a person in Mexico $16 an hour is still 50% cheaper then paying an American $16 an hour.
Is that payroll tax and stuff like that? Or something else?
Sounds like a boon for Mexico, good for them. I guess it's kind of satisfying to see these policies have the opposite of the intended effect.
>it's kind of satisfying to see these policies have the opposite of the intended effect
This policy is actually doing exactly what it is suppose to. It is preventing more auto manufacturers from moving operations to Mexico or Canada where labor and Exchange rates are more favorable.
GM, FORD, Toyota, Honda, Chrysler all had their eye on moving more production to Mexico, this new agreement probably stops that.
I don't think anyone thought an auto manufacturer in Mexico would pull up shop and move to the US, that wouldn't make sense.
This policy is actually doing exactly what it is suppose to. It is preventing more auto manufacturers from moving operations to Mexico or Canada where labor and Exchange rates are more favorable.
GM, FORD, Toyota, Honda, Chrysler all had their eye on moving more production to Mexico, this new agreement probably stops that.
I don't think anyone thought an auto manufacturer in Mexico would pull up shop and move to the US, that wouldn't make sense.
Nothing is moving to Canada, there had been a pretty big exodus from Michigan and Ontario to Texas and Mexico after Nafta. They’re still closing plants in Ontario and moving them to Mexico.
16$ an hour is less than what they pay in Canada.
Source: I work for a supplier in the Automotive Capital of Canada. These comments are so egregiously false.
16$ an hour is less than what they pay in Canada.
Source: I work for a supplier in the Automotive Capital of Canada. These comments are so egregiously false.
>16$ an hour is less than what they pay in Canada.
It's the equivalent of 16. USD. So around 22. CAD?
I agree, nothing is moving to Canada (comment was more aimed at Mexico)I guess since you work for a supplier you heard of FORD probably closing down their Oakville Assembly plant since they are not assigning any vehicle production to that plant after they stop making the Edge and the Lincoln equivalent.
It's the equivalent of 16. USD. So around 22. CAD?
I agree, nothing is moving to Canada (comment was more aimed at Mexico)I guess since you work for a supplier you heard of FORD probably closing down their Oakville Assembly plant since they are not assigning any vehicle production to that plant after they stop making the Edge and the Lincoln equivalent.
They've also closed the Oshawa GM Plant, and they've reduced a shift at the FCA minivan plant. GM exited Windsor about 20 years ago. If anything the new agreement is aimed at re-balancing auto back to the US and Canada. We had a great automotive relationship in the past, it's mutually beneficial to both economies as there are strengths and weaknesses in the US industry and Canadian Industry. I'm interested to see what happens. I want to see Detroit as great as it was before NAFTA destroyed it.
It's good for the US to have economically prosperous neighbors too.
hilarious to the point of tears since we've been enabling the opposite for decades
Canada is one of the most affluent, stable, peaceful nations. For 2019 Canada's GDP per capita just barely missed surpassing Germany. They happen to be a prominent neighbor to the US, their primary cities are positioned next to the US border, and they are likely to get a lot wealthier in the coming decades. If the US gets credit for the bad, it also gets credit for the good (which is the part that critics universally evade at all costs).
In GDP per capita Mexico ranks in front of 120 other nations, including: China, Turkey, Brazil, Argentina, Thailand, and just behind Russia. US imports are 1/3 of their economy; we're running a $100 billion trade deficit with Mexico, which is to their benefit. As an American I'm happy that we're doing that, it's to our benefit that Mexico's economy advances. It has the 15th largest economy in the world and continues to gradually climb. That's despite the intense domestic chaos they've been dealing with there the past ~13 years. As a developing nation their long-term economic potential is immense.
In GDP per capita Mexico ranks in front of 120 other nations, including: China, Turkey, Brazil, Argentina, Thailand, and just behind Russia. US imports are 1/3 of their economy; we're running a $100 billion trade deficit with Mexico, which is to their benefit. As an American I'm happy that we're doing that, it's to our benefit that Mexico's economy advances. It has the 15th largest economy in the world and continues to gradually climb. That's despite the intense domestic chaos they've been dealing with there the past ~13 years. As a developing nation their long-term economic potential is immense.
GDP is completely useless as an indicator of anything important. Sell the same house 10 times and it will contribute to the GDP 10 times. However it is the same house. Nothing has changed. Nothing of value has been added.
Real estate agents hate him!
Even triple the pay they are making $16 dollars/hour which is less than whatever an american auto worker is going to make.
Mexican workers get a dramatic quality of life improvement. US workers don't have to work for less than market value / cost of living prices. Tens of thousands of US people continue to get cheap cars. Sounds like a great deal.
Yes, US workers get to enjoy unemployment instead. Brilliant solution.
Maybe not. If you raise wages in Mexico, the number who come to the US looking for jobs goes down. That may move the supply-vs-demand more in favor of labor in the US.
is a japanese company supposed to make decisions based on what is best for US workers?
with all the talk of america first, who cares how this impacts US workers?
with all the talk of america first, who cares how this impacts US workers?
And a ton of Japanese cars are made in the US already, as well. My wife's Subaru, for example, is made in Indiana. That's part of the reason why we chose to buy a Subaru, in fact. A lot of "US" cars, in contrast, are not made in the US.
Some Mexican workers get a dramatic quality of life improvement. Others become unemployed as demand drops alongside the increased car price and as the "automate or not" formula gets tipped a little more against them.
Exporting working class jobs from a higher cost of living area to a lower cost of living area is on the whole a loss for the vast majority of people who are not wealthy and a gain for those who are wealthy. It’s a blatant wealth transfer from the masses to the wealthy few. So Americans get cheaper cars but no way to pay for them, and wealthy Americans get record levels of wealth.
Globalism is a sham and it’s surprising to still see someone parrot its hollow logic that only makes sense if you look at it in the short term and on a small scale instead of as a long term society-wide trend.
Globalism is a sham and it’s surprising to still see someone parrot its hollow logic that only makes sense if you look at it in the short term and on a small scale instead of as a long term society-wide trend.
What about those who live in the lower cost of living area, who now gain access to new jobs? Isn't it a wealth transfer to them as well? And these people usually aren't wealthy (usually less wealthy than those in the US), so calling it a wealth transfer from the masses to the wealth few isn't fully accurate.
And a dollar goes much further in Mexico than it does in the US, so even if the net labour spending by companies goes down, more people will be able to have jobs. I think it's reasonable to believe that 2 people with jobs is better than one person than with a job, even if the 2 are in Mexico, and the one is in the US.
And a dollar goes much further in Mexico than it does in the US, so even if the net labour spending by companies goes down, more people will be able to have jobs. I think it's reasonable to believe that 2 people with jobs is better than one person than with a job, even if the 2 are in Mexico, and the one is in the US.
As an American I see it from an American perspective. So a job loss here is a loss of wealth here, no matter what country it gets transferred to. The globalist perspective is one that damages every single person in the West whose society relies on a healthy well-paid middle class, that is now well-gutted, and we’re seeing the horrible chaotic effects of it over the past 5 years. Every father who made $25/hr at a plant years ago now has a son who makes $9/hr at a Dollar General, and both father and son are happy to back the next Hitler or Putin so long as he promises to make their lives great again. The transfer of wealth from Western society to poor societies is demolishing all of us. The US is rapidly becoming like Putin’s Russia and Europe is still in danger of falling apart despite its stronger safety net. Globalism has made freedom and prosperity very precarious these days.
Well, nobody is "owed" a job. Markets transform and respond to pressures. When you operate in a saturated market like the US the only line item on the balance sheet that is easy to tackle is labor costs, not revenue or profit. Your customers aren't going to buy products from you because you gave a raise to your janitor instead of replacing them with a roomba (relax, its a joke :P). The China/Walmart economy is here to stay. For retail companies, the only growth markets that you can sell into are the developing world markets around the world. These are also the companies your retirement funds are invested in, unless you don't want your savings to grow. If every country turned protectionist, it will trigger a massive economic depression. I suppose we'd come out of it eventually, if global warming doesn't kill us first :)
So what do you do for those that end up on the wrong side of the equation, especially those who have been there for a long time?
I don't understand why some HNer is expected to have an answer for this because no part of US society does.
We've underfunded career counseling in public schools for generations. We don't have any healthy career retraining system like other OECD countries do. Unemployment systems in the USA are nearly useless when it comes to retraining employees -- they really just act as job boards. Most states don't seem capable of attracting different industries, so when a batch of jobs leave a region, those employees struggle to find a near replacement. We have massive mental health and addiction problems so companies spend a lot of effort to avoid hiring anyone who might raise these costs for the company.
US society doesn't actually care about employees who don't take care of themselves. It's time we stop pretending like we do and call a spade a spade.
We've underfunded career counseling in public schools for generations. We don't have any healthy career retraining system like other OECD countries do. Unemployment systems in the USA are nearly useless when it comes to retraining employees -- they really just act as job boards. Most states don't seem capable of attracting different industries, so when a batch of jobs leave a region, those employees struggle to find a near replacement. We have massive mental health and addiction problems so companies spend a lot of effort to avoid hiring anyone who might raise these costs for the company.
US society doesn't actually care about employees who don't take care of themselves. It's time we stop pretending like we do and call a spade a spade.
Yep agree. At least be honest about not giving a s* about other people. That would be a small improvement.
> So what do you do for those that end up on the wrong side of the equation, especially those who have been there for a long time?
Tax the capitalists to reduce inequality and also fully fund better programs like healthcare, education? This funding is wages for workers and as a society we remain developed?
The only problem with all our systems is disproportionate gains at the top.
Tax the capitalists to reduce inequality and also fully fund better programs like healthcare, education? This funding is wages for workers and as a society we remain developed?
The only problem with all our systems is disproportionate gains at the top.
Everyone in western society is owed a good well-paying job so long as they’re also willing to work for it. It’s our birthright and expectation. You can believe that no one is owed that and that everyone can just work for pennies from Walmart as America and the Western world continues to go down in flames.
Well, that is certainly a major difference between our points of view. I'm not going to say that you're wrong. Global labor arbitrage is an expected byproduct of Capitalism. There is no easy fix for that. Economies will have to transform as the requirements of the workforce change. The trend is certainly towards more automation and off-shoring, and just like we don't expect people to be ditch-diggers anymore, maybe we won't expect them to do menial jobs too. And on top of that the current population of the world is simply not sustainable, doesn't matter where you live.
On the other hand, if factories in Mexico competing for that workforce now have to look at $16 per hour, the competitiveness of an LA or San Diego area textile and clothing factory just became very slim until US wage in that sector rise.
What do you think of the argument that foreign imports are just another kind of technology, allowing us to produce things cheaper with less labor? Surely it wouldn't be helpful for us to ban industrial bread machines so that more Americans have jobs as bakers.
Fun fact: in some states they passed laws that make it illegal to pump your own gas just so gas station attendants wouldn't lose their jobs.
I don't know about that. Being an autoworker no longer pays that well from what I understand. There are tiered levels of pay depending on how long ago you were hired, etc. It's not like the old days where you earned what the guy with 30 years of seniority earned per hour. Even the benefits are different with some folks who have been around for a couple of decades enjoy a different level of coverage or vacation, etc.
That's a lot more than other factory workers in Mexico and still more than some non-auto factory workers in the US. If the best factory workers in Mexico all go to the auto factories in droves, the factory base wage eventually goes up there. The competitive advantage for clothing, toys, and furniture factories there eventually diminishes.
> The competitive advantage for clothing, toys, and furniture factories there eventually diminishes.
Perhaps, but Mexico has a ton of advantages that lots of other countries don't. They have cheap labor and can source parts quickly and cheaply from the USA.
Mexico has low-friction trade agreements with something like 40 other countries. In an age where America's government is demanding to renegotiate trade deals and do them all outside the WTO and rejecting all 3+ lateral deals, Mexico's trade policy stability is still an advantage over the current US policies, even if they lose some wage benefits.
Perhaps, but Mexico has a ton of advantages that lots of other countries don't. They have cheap labor and can source parts quickly and cheaply from the USA.
Mexico has low-friction trade agreements with something like 40 other countries. In an age where America's government is demanding to renegotiate trade deals and do them all outside the WTO and rejecting all 3+ lateral deals, Mexico's trade policy stability is still an advantage over the current US policies, even if they lose some wage benefits.
The article is making it sound like some kind of backfire, and I'm not really sure why. It's gotta be good in the long run for US auto workers if their competitors' wages triple.
Because the US now gets no new jobs but the price for the cars will go up as the labour cost increases, proving the very trivial point that tariffs function as a tax on domestic consumers. If the goal of the policy was to redistribute money from Japanese carmakers and American consumers to Mexican factory workers they've done a great job, very altruistic.
Also it's quite hilarious how quickly the reputation of the US has deterioated. The US is now being treated like an unreliable country.
"We don't want to be whipped around by a policy that we don't know how long it will last," said an executive at a Japanese automaker."
Also it's quite hilarious how quickly the reputation of the US has deterioated. The US is now being treated like an unreliable country.
"We don't want to be whipped around by a policy that we don't know how long it will last," said an executive at a Japanese automaker."
Raising your neighbor's income means they will import more from you, it's not backfiring, it's working as intended.
But it’s not. It’s funding more robots for the Mexican plants, which means fewer jobs for Mexican auto workers. So some workers will do better, others worse. And American consumers pay higher prices, so they are worse off.
Are the robots cheaper or more expensive than human workers?
There is some broken thinking that high wages will increase consumer cost but replacing humans with cheaper robots won't, cherry-picking armchair cause-and-effect thinking to fit a "this is bad" narrative.
Reducing trade frictions forces economic equality, especially when that reduction is tied towards some equality metric, like wages.
Products being cheap because of economic disparity in trading partners isn't something to celebrate or bemoan the loss of. What is good for our neighbors is good for us. So many people are arguing from both sides at the same time.
There is some broken thinking that high wages will increase consumer cost but replacing humans with cheaper robots won't, cherry-picking armchair cause-and-effect thinking to fit a "this is bad" narrative.
Reducing trade frictions forces economic equality, especially when that reduction is tied towards some equality metric, like wages.
Products being cheap because of economic disparity in trading partners isn't something to celebrate or bemoan the loss of. What is good for our neighbors is good for us. So many people are arguing from both sides at the same time.
The more you are forced to pay workers, the more attractive robots become.
The jaw of comparative advantage tells us that unrestrained trade benefits both parties. It means we get to deploy our workforce into higher value and higher paying jobs, while they get to increase their standard of living as well.
The jaw of comparative advantage tells us that unrestrained trade benefits both parties. It means we get to deploy our workforce into higher value and higher paying jobs, while they get to increase their standard of living as well.
It’s still deteriorating to a position above where it should be.
The US has caused so much uncountable suffering with its middle east policy, half the country is obese due in part to taking advantage of the dollar reserve status, and its politicians with Wall St. sold out most of the American workers for a quick buck (now these workers are all killing themselves with drugs or from joining the military to protect other countries borders).
Reputation needs to drop much more to reflect the situation.
The US has caused so much uncountable suffering with its middle east policy, half the country is obese due in part to taking advantage of the dollar reserve status, and its politicians with Wall St. sold out most of the American workers for a quick buck (now these workers are all killing themselves with drugs or from joining the military to protect other countries borders).
Reputation needs to drop much more to reflect the situation.
> Because the US now gets no new jobs but the price for the cars will go up as the labour cost increases
Over the long term it will help drive automation which will lower the cost of cars and bring jobs to the countries with high levels of education and training.
Over the long term it will help drive automation which will lower the cost of cars and bring jobs to the countries with high levels of education and training.
The quoted Japanese executive is betting that the next administration will probably do it's best to undo these actions that Trump is taking. That's the cost of Trump (and others) acting unilaterally rather than building consensus. If he had chosen to compromise on other things with his opponents and gotten them on board with this, this trade policy would have been taken seriously and had its intended effect. Instead Trump is left with nothing.
Although it's in vogue to hate on Biden for being old, out of touch, not progressive enough etc., this speaks to the effectiveness of his core political strategy - reaching across the aisle and building consensus. The system might not usually reward such behaviour, but it often leads to solutions that last.
Although it's in vogue to hate on Biden for being old, out of touch, not progressive enough etc., this speaks to the effectiveness of his core political strategy - reaching across the aisle and building consensus. The system might not usually reward such behaviour, but it often leads to solutions that last.
> The US is now being treated like an unreliable country
All countries are unreliable. I'm sure FAANG feels the same about the EU.
All countries are unreliable. I'm sure FAANG feels the same about the EU.
What are these 'wages' of which you speak? Robots do not have hourly wages:
"Auto component maker Piolax, will also raise the hourly wage at its Mexican plant to $16 within the year. The company is also installing robots to mitigate rising labor costs, President Yukihiko Shimazu said."
"Auto component maker Piolax, will also raise the hourly wage at its Mexican plant to $16 within the year. The company is also installing robots to mitigate rising labor costs, President Yukihiko Shimazu said."
Anyone else a 'robotic automation takeover of all jobs' skeptic?
There are obviously places where it makes sense, but a $15/hr human is preeeetty cheap compared to the price, programming, and maintenance of a robot.
Seeing the quote from Yukihiko, I feel it reads like PR or a soothing word to stockholders who hate to hear about employees and wages
There are obviously places where it makes sense, but a $15/hr human is preeeetty cheap compared to the price, programming, and maintenance of a robot.
Seeing the quote from Yukihiko, I feel it reads like PR or a soothing word to stockholders who hate to hear about employees and wages
> There are obviously places where it makes sense, but a $15/hr human is preeeetty cheap compared to the price, programming, and maintenance of a robot.
But such a robot is a good insurance against further increases of minimum wages.
But such a robot is a good insurance against further increases of minimum wages.
It also is great if the tariffs get dropped, since you were going to invest in robots anyway and this just moves your R&D forward in time. Which is better, relocating your entire factory & supply chain permanently only for the tariffs to disappear and render the entire exercise moot, or prioritize robots (even more than you were before, given coronavirus) and then regardless of what happens, you still enjoy the benefits of the robots? This and coronavirus and the recession are playing their usual role of shocking entities out of local optima... in this case, towards more automation & remote working. It is deeply ironic that Trump is essentially gouging Americans' welfare by forcing jacked-up prices which will subsidize the very automation & trade dynamics the Rust Belt blames their woes on.
Cynically: you don't even need a real, working robot in-hand in order to threaten minimum wages. Even cheaper.
Toyota and Tesla (among many companies) found out the hard way that robots are still very dumb and not a substitute for all jobs.
But then somebody has to make and maintain the robots. If this is only the equivalent in cost to the existing jobs, it's still going to labor. If it's less then prices decline unless the manufacturer is a monopolist, and lower prices are about as good as higher wages. (If the manufacturer is a monopolist we've got trouble, but that's always the case.)
For context in Mexico the average wage for an auto assembly worker was $7.34 per hour and just $3.41 per hour for an auto parts worker in 2017.[0]
[0]https://www.cargroup.org/wp-content/uploads/2018/04/nafta_br...
[0]https://www.cargroup.org/wp-content/uploads/2018/04/nafta_br...
What are the benefits to the companies of increasing minimum wage if the condition for no tariffs is increase minimum wage and move production to US?
Of course, because as soon as they do that, they’ll start planning to phase out humans as much as possible. It’s clear that we are on the cusp of total automation. Moving a factory to US is probably just more costly than to pay employees $16 for a few more years.
And the employees who are left are highly paid engineers anyways.
And the employees who are left are highly paid engineers anyways.
It turns out the real border wall was the friends we made along the way.
That is: if auto workers are being paid that minimum wage by foreign automakers, that's gonna be a massive boon to Mexican household incomes, which improves the standard of living for at least some people, and in a dramatic way. This money will, I reckon, go straight toward things like entrepreneurship, higher education, and other things that help with upward mobility on a generational scale. This can (and I hope will) translate to less emigration pressure, since fewer Mexicans will feel the need to move north for US wages if they're already being paid US wages, and fewer migrants from further south will feel the need to continue across the US/Mexico border if they could instead settle in Mexico for similar pay and much lower cost of living. This could persist long-term, since a better-educated and more innovative population can give the Mexican economy one hell of a jumpstart (and, importantly, help whip up a generation of Mexicans with the technical education to keep up with the inevitable automation push).
I'm curious how this will play out long term, but it seems reasonable to me that we should pay workers according to the value they create rather than merely the cheapest employers can get away with paying (and contrary to what the far-capitalists might claim, these are rarely if ever in sync, especially when talking about outsourced labor; a worker in Mexico is not inherently worth different than a worker in the US, so why should those two workers be paid differently?), and I'm oddly optimistic about how this might play out.
That is: if auto workers are being paid that minimum wage by foreign automakers, that's gonna be a massive boon to Mexican household incomes, which improves the standard of living for at least some people, and in a dramatic way. This money will, I reckon, go straight toward things like entrepreneurship, higher education, and other things that help with upward mobility on a generational scale. This can (and I hope will) translate to less emigration pressure, since fewer Mexicans will feel the need to move north for US wages if they're already being paid US wages, and fewer migrants from further south will feel the need to continue across the US/Mexico border if they could instead settle in Mexico for similar pay and much lower cost of living. This could persist long-term, since a better-educated and more innovative population can give the Mexican economy one hell of a jumpstart (and, importantly, help whip up a generation of Mexicans with the technical education to keep up with the inevitable automation push).
I'm curious how this will play out long term, but it seems reasonable to me that we should pay workers according to the value they create rather than merely the cheapest employers can get away with paying (and contrary to what the far-capitalists might claim, these are rarely if ever in sync, especially when talking about outsourced labor; a worker in Mexico is not inherently worth different than a worker in the US, so why should those two workers be paid differently?), and I'm oddly optimistic about how this might play out.
The big issue seems to be that companies don’t know how long this version of NAFTA will last. If Biden becomes the next president and signals support for keeping the agreement the way it is, there’s a good shot they’ll move to the USA.
Even if they were sure it was going to last, why would they move to the US?
If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
If they move to the US, they will be paying US levels of pay for both the cars they build for the US and Canada and the ones they build for the rest of the American continents.
Another disadvantage of building in the US cars for export to other countries that are not Canada or Mexico is they would have to worry about a trade war between the US and those other countries. If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
If they move to the US, they will be paying US levels of pay for both the cars they build for the US and Canada and the ones they build for the rest of the American continents.
Another disadvantage of building in the US cars for export to other countries that are not Canada or Mexico is they would have to worry about a trade war between the US and those other countries. If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
> Even if they were sure it was going to last, why would they move to the US?
If it no longer saves them money to be somewhere else, it's good PR. You get to hang a huge "made in USA" flag on your dealerships.
> If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
People in the rest of the Americas buy different vehicle models. Chevy Beat, Nissan March, Volkswagen Vento. Very popular in Mexico.
The US market also just dominates the market on the entire continent. It has almost as many people as all of South America, but more importantly, they're the people who buy new cars. Many of those other countries not only have lower car ownership rates, a large fraction of their cars are used cars exported from the US market.
So they don't buy nearly as many new cars and most of what they do buy are different vehicle models.
> If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
This is assuming cars being assembled in Mexico are being exported in large numbers to the countries likely to get into a trade war with the US, which are predominantly on other continents. But the cars sold in those markets are typically also manufactured there. The Yaris is popular in Europe, they make them in France. The Buick Excelle is popular in China, they make them in Shanghai.
The Toyota Corolla is manufactured on six continents.
The cars they make in North America are mostly going to the US. And a trade war between the US and e.g. Costa Rica doesn't seem that likely, or if it somehow happened, that much of a concern for US auto manufacturing.
If it no longer saves them money to be somewhere else, it's good PR. You get to hang a huge "made in USA" flag on your dealerships.
> If they stay in Mexico, they can build cars for the US and Canadian markets and make sure that 40% of the parts are made by workers making $16 an hour to avoid tariffs, and in the same plant they can build cars for the rest of the countries in the Americas but use parts made by workers making more normal Mexican wages.
People in the rest of the Americas buy different vehicle models. Chevy Beat, Nissan March, Volkswagen Vento. Very popular in Mexico.
The US market also just dominates the market on the entire continent. It has almost as many people as all of South America, but more importantly, they're the people who buy new cars. Many of those other countries not only have lower car ownership rates, a large fraction of their cars are used cars exported from the US market.
So they don't buy nearly as many new cars and most of what they do buy are different vehicle models.
> If the current US administration slaps tariffs on country X, and X retaliates with tariffs on some US export and happens to pick cars as one of those exports, that is going to hurt the car company's sales. If they had remained in Mexico, they would not have to worry about US trade wars messing up their sales outside the US.
This is assuming cars being assembled in Mexico are being exported in large numbers to the countries likely to get into a trade war with the US, which are predominantly on other continents. But the cars sold in those markets are typically also manufactured there. The Yaris is popular in Europe, they make them in France. The Buick Excelle is popular in China, they make them in Shanghai.
The Toyota Corolla is manufactured on six continents.
The cars they make in North America are mostly going to the US. And a trade war between the US and e.g. Costa Rica doesn't seem that likely, or if it somehow happened, that much of a concern for US auto manufacturing.
He could also signal support for leaving it the way it is right now and create an immediate benefit to American workers, but he doesn't really have the political incentive to signal that right now even if that's what he intends to do. (And the political incentive only changes if voters respond negatively to that sort of political gamesmanship.)
> The center also said U.S. car sales will drop by up to 1.3 million units annually due to the Trump administration's trade policy
This is incredibly good news, if true. We need to reduce the number of cars in the US if we are going to have any chance of confronting climate change.
This is incredibly good news, if true. We need to reduce the number of cars in the US if we are going to have any chance of confronting climate change.
Only if there's a corresponding drop in the number of cars in use. It could be that people keep their old, inefficient, polluting cars for on the road for longer rather than replacing it. That would be bad for the environment.
There is some disagreement about whether this is actually the case. It takes a lot of resources to build a new car. Meanwhile the average passenger cars has been above 30MPG for 15 years now and the newer ones aren't dramatically better than that. So you only come out ahead with a new car if you put a lot of miles on it. But then that's still conflating "new" and "efficient" -- a 2004 Prius still gets better mileage than the new car average.
This doesn't apply to electric cars, which do use dramatically less petroleum (i.e. none), but they're mostly already made in the US, so making petrol cars cost more may actually be an environmental advantage because more people will buy electric.
This doesn't apply to electric cars, which do use dramatically less petroleum (i.e. none), but they're mostly already made in the US, so making petrol cars cost more may actually be an environmental advantage because more people will buy electric.
People are driving drastically less.
Not without a change in the underlying dynamics including infrastructure. Used car sales and prices have dropped drastically and so people would just keep their old inefficient cars longer than ever before.
Remote working if it sticks might contribute more to car reduction.
Remote working if it sticks might contribute more to car reduction.