Introduction to Nearshoring in Mexico
For decades, Mexico has been known as a country of low-cost labor, attracting foreign investments. This strategy indeed motivated international companies, but it created significant wage gaps with many trade partners. The reality remains largely unchanged, even as the concept has become more sophisticated with the term nearshoring in commercial jargon.
Bank of Mexico’s Analysis on Nearshoring
The Bank of Mexico conducted an analysis from 2020 to 2023, titled “Initial Effects of Production Relocation on the Mexican Manufacturing Labor Market,” to define nearshoring’s impact on employment.
The study, led by Erick Rangel González, Marco A. Esteban Aguirre, and Irving Llamosas Rosas, found that nearshoring expanded the manufacturing workforce by an average of 6.2% in industries with high potential.
Wage Concerns Despite Job Growth
However, the most concerning finding is that nearshoring did not result in higher wages for workers. The aggregated results showed a marginal 0.69% effect on perceptions, while the disaggregated results indicated a variation of -0.005%.
The Bank of Mexico warns in the analysis that monitoring this process is crucial to avoid repeating the challenges of the previous maquiladora model, which was historically characterized by offering low-wage jobs.
Productivity and Wages
Although the study suggests a moderate positive effect on productivity (4.6% according to the aggregated SCM), this increase is not reflected in the workforce. With productivity gains and stagnant wages, profits are being concentrated solely in capital.
Key Findings and Implications
- More Jobs, Not Better Lives: Nearshoring has led to more manufacturing jobs in Mexico, but it hasn’t necessarily improved workers’ lives.
- Limited Impact on Wages: There is no significant impact on the wages of industries most prone to nearshoring.
- Unclear Productivity Benefits: While some estimates suggest a small positive effect on productivity in relocation-prone industries, the overall impact remains unclear.
In summary, nearshoring has resulted in more jobs but not necessarily better working conditions. It can be a catalyst for real change, provided it becomes an integral development strategy rather than just a magnet for businesses. The challenge for Mexico is not only to attract investments but also to create dignified jobs through them. If the country fails to elevate productivity, diversify its technological base, and ensure better wages, nearshoring will be remembered as a missed opportunity regarding job quality.
