MEXICO CITY, April 4 Mexico's hourly wages are
about a fifth lower than China's, a huge turnaround from just 10
years ago when they were nearly three times higher, according to
new research by Bank of America Merrill Lynch.
Stagnant salaries in Mexico, fueled by strong population
growth, will give Latin America's second-biggest economy an edge
over China in the U.S. market, Bank of America Merrill Lynch
economist Carlos Capistran said on Thursday.
Average hourly wages are now 19.6 percent lower in Mexico
than China whereas in 2003 they were 188 percent more costly,
according to the Bank of America study.
Mexico can maintain that competitive advantage for at least
five years, thanks to a growing labor market that puts downward
pressure on wages, Capistran said.
The demographic bonus from its young population will help
boost Mexican growth to 4 percent this year, he added, and is
even more important to juicing the economy than a raft of
reforms proposed by centrist President Enrique Pena Nieto, who
took office in December.
"Today people are excited about Mexico because of the
reforms, et cetera. But when I ask myself 'what is the most
important thing that Mexico has today in terms of growth,' it's
the demographic bonus," Capistran said.
Pena Nieto's government has already passed major education
and labor reforms, while an ambitious plan to boost
competitiveness in the phone industry, where tycoon Carlos Slim
holds sway, is winding its way through Congress.
According to forecasts by the International Labor
Organization, Mexico's economically active population will grow
by 20 percent from 2010 to 2020, compared to a 2.9 percent
increase in China over the same period.
Lower transportation costs and projected productivity gains
in manufacturing will also bolster Mexico's competitiveness,
Bank of America said. That, in turn, can help compensate for the
currency's rapid rise, which tends to hurt exporters.
Optimism about Mexico's reforms has helped the peso gain
more than 4 percent this year, prompting the central bank to cut
interest rates to a historic low, in a bid to tame the appeal of
the currency and peso-denominated debt.
Mexico's wages as a proportion of economic output are lower
than those in Indonesia, the Philippines, Thailand, South Korea,
Hungary, Poland and Brazil, where labor costs have risen
The wage restraint has allowed Mexico to increase its U.S.
market share at a faster pace than China over the past six
However, China still had the bigger share at the close of
2012: China accounted for 17.5 percent of U.S. imports that year
while Mexico accounted for 12.4 percent over the same period,
according to Bank of America.