Mexico: Desperately Seeking Skilled Labor

Even with wages rising, Mexico's companies can't find enough

Edgardo Saucedo was fed up with his job at a brewery. The pay was good, but the company wouldn't train him or give him a permanent job. So earlier this year the 20-year-old machinist walked out and went to work for Nemak, a fast-growing auto-parts company in a suburb of Monterrey. "I prefer a job where I can start at the bottom but have some security and a chance to move up," says Saucedo, whose gel-spiked hair is a counterpoint to Nemak's regulation blue overalls.

Saucedo has good reason to feel confident. As new investment, both foreign and local, pours into Monterrey, Mexico's industrial capital, companies are faced with a shortage of skilled labor. They're scrambling to attract and retain workers with a technical degree plus some solid experience--machinists, tool-and-die makers, and welders, as well as skilled workers in other trades. Not surprisingly, starting salaries for skilled workers have climbed to $90 to $100 a week in Monterrey's Nuevo Leon state. That may not seem like much, but two-thirds of Mexicans earn less. "We think the cost of labor will keep rising,"says Armando Tamez, Nemak's executive vice-president for product development.

That's quite a change for Mexico, where low wages and high turnover have long been the norm. With millions of low-skilled workers willing to work for $5 or $6 a day plus benefits, companies typically make up what they lack in productivity with manpower. But manufacturers now are feeling the effects of four years of robust growth averaging an annual 5.1%, and $11 billion a year in foreign direct investment--most of it directed at the export sector.

DEFICIT. From the maquiladora-heavy northern border to the highly industrialized center of the country, companies report they are running into labor shortages. "It takes a lot longer to fill 100 places," says Francisco Rodriguez, human resources director at Grupo IMSA, a steel and auto-parts group in Monterrey.

In Nuevo Leon, the local manufacturing industry chamber estimates that the shortfall in skilled workers amounted to 35,544 last year. That's up from 19,096 just two years earlier (chart). Thanks in large part to this deficit, Salvador Gutierrez, a chamber official and director general of auto-parts maker Industria Automotriz, figures that salaries rose an average of 14% in Monterrey last year, vs. 5% to 6% nationally.

Companies are having to make do, training welders or tool-and-die makers themselves or hiring newly minted engineers to do the work. At Nemak, new hires get some 400 hours of training in their first two to three years with the company, at a cost of $4,000 to $5,000 per employee. Nemak, the auto-parts division of Monterrey steel and petrochemicals giant Alfa, also pays its workers 10% to 15% above market wages, which helps reduce turnover. A machinist with a couple of years' experience earns about $135 a week. Benefits ranging from subsidized lunches to Christmas bonuses add 75% to 100% to base pay. For the company, the extra expenses pay off: Productivity at its plant grew by 9% last year.

Mexico: Desperately Seeking Skilled Labor

Yet the private sector on its own can't address the vast national deficit in skilled workers. That's the responsibility of Mexico's overstretched education system. The federal government, with assistance from some companies, has set up two technical junior colleges in Monterrey, both offering a two-year degree. Meanwhile, the Nuevo Leon government has funded three technical training centers for unemployed workers. And the Alvaro Obregon Industrial & Technical High School is lobbying businesses to donate machinery so students can get practical training. "The closer the relationship is with the company, the better it is for the students," says Jose Efren Castillo, the school's director. Starting salaries for graduating machinists rose 25% last year.

Wages will probably keep rising if Mexico manages to get through this year's presidential election without an economic crisis. For companies such as Nemak, that shouldn't be a problem. Tamez believes that profitable businesses should "share the wealth." He recalls Henry Ford's maxim that each of his workers should earn enough to be able to buy his own car. If things work out for Edgardo Saucedo, the new hire at Nemak, he may soon have a new set of wheels.

Before it's here, it's on the Bloomberg Terminal.