Is Mexico Ready With People for Nearshoring Wave?

Does Mexico have enough trained and qualified people to support the nearshoring wave of companies coming in? That is the million-dollar question. 

First, the labor pool is big and young: Out of the 129 million total estimated population in Mexico as of January 2024¹, Mexico had 60.6 million people economically active (able to work), with 58.9 million people working, and 1.7 million unemployed. Out of the 58.9 million people working, 12.9 million work in informality (most likely low income, no medical insurance, and no benefits) and only 9.3 million people work in manufacturing, which is a more attractive industry to work for from an income perspective; so the talent pool is considerable. Another positive factor to take into account is population age. The median age for the Mexican population is 31 years compared to 40 in China, and 39 in the United States.

Second, skilled workers. Automotive is the oldest, strongest, and most advanced industry in Mexico, representing 4.9% of GDP and employing more than 900,000 people out of the total 9.3 million employed in manufacturing. Additional industries like aerospace, heavy machinery, trucks, home appliances, electronics, medical devices, and textiles, have been around long enough to develop a strong, skilled workforce.

Third, education. As of 2020¹, according to the latest Mexico census, out of the total population in Mexico older than 15 years old, 49.3% had completed basic education (three years of kindergarten, six years of primary school, and three years of secondary school). Twenty-four percent of those older than 15 years had completed a high school education (three more years), and 21.6% had completed a college degree. This means that out of the total population above 15 years old, a staggering 94%, by education, could have some type of job in a nearshoring manufacturing business.

Fourth, advanced education. Mexico has a total of 380 public universities in two networks (266 in the technological institute network² with 600,000 students and 114 in technological universities³ with 78,000 students) plus the Politecnico⁴ with 216,000 students, another big public university. Mexico also has several private universities like the Institute Technological of Monterrey⁵ with 68,000 students and Universidad Anahuac with 35,000 students. All these universities offer STEM and business degrees to support the Manufacturing Nearshoring companies.

Conclusion: Generally speaking, Mexico is well-positioned to receive nearshoring manufacturing companies. But, like everything, the devil is in the details: some technical jobs are difficult and more expensive to fill, including welders, fork truck drivers, assembly technicians, painting technicians, machinists, and die-tool technicians. To fill this gap, specific training programs for high schoolers are needed, either through private companies or via public technical high schools or specific government development programs. One other big problem Mexico faces is the region's disparity: In the north of Mexico, labor is scarce and expensive; in the south of Mexico, labor is abundant and cheap, but there is no manufacturing developed at scale there, yet.

The real challenge: Attracting, retaining, engaging, and developing people, particularly in a manufacturing environment, has become a real challenge these days. To master this critical aspect of any business requires science, discipline, and intentionality. Just to put things in perspective, according to data published recently⁶ turnover rates for frontline workers can be between 22% and 176% on an annual basis, and the cost of replacing and training a frontline worker can be up to US$$13,000, which can turn into millions spent. Just to put things into perspective, this means that in a 250-person business, if there was a 50% turnover rate, which is not that uncommon, a company could spend up to US$1.625 million per year, which is a huge amount of money that not only drains the financials of companies, but creates additional safety, quality, and productivity issues. 

What has happened? How did we end up in this situation?

I believe five main things caused this crisis: supply and demand; lack of loyalty; the advertising industry, the food industry, and social media.

Supply and Demand. According to the US Bureau of Labor Statistics, in 2009, there were around six unemployed people for every open job; in June 2024, there were only 0.8 unemployed people for every open job, meaning, there are not enough workers to fill all the open jobs. Employees know it, they have the upper hand: If they don´t like a job for whatever reason (valid or not), they can simply walk away and get another job across the street the very next day.

Lack of loyalty. Decades ago, companies considered employees their most valued asset – and they meant it: job security, pensions and benefits, and lifetime employment were commonly offered by companies between the 1950s and the ‘70s in return for loyal life-employment workers. Starting in the 1980s, companies started prioritizing shareholder value over the welfare of employees. Cost-cutting, efficiency, and short-term gains became a priority, which consequently led to major downsizing and layoffs as the economic conditions demanded. 

The advertising industry. Even though advertising has been around for centuries, this industry was propelled by key technological advances: the printing press in the 15th century, which popularized newspapers in the 17th century; the radio in the early-20th century and television by the mid-20th century; but it was behavioral science, combined with television sets installed in millions of houses around the world in the ‘60s and  ‘70s, and with the economic improvements for regular people around the world and more companies dedicated to satisfying the needs of their buyers, that created the consumer market of today. Growing up, I don´t remember the need to buy new clothes every so often or replace my phone, my laptop, or my tablet every couple of years. I don't recall looking for the latest gadget … there weren't any! But today, big shopping malls, Amazon, and the like, combined with well-crafted advertising and the unboxing experience, have changed our brains and turned us into consumers who get gratification from buying things we don’t need and that bring us no real joy. This, in turn, gives us a big incentive to work.

Social media. As if becoming addicted to purchase gratification wasn’t bad enough, social media became the icing on the cake. With algorithms like TikTok, designed to provide instant gratification at a very fast speed, grabbing our attention for hours at a time has changed our minds – and I’m not sure it’s for the better.

Food industry. It is known that in the ‘70s, the United States had a 15% obesity rate, compared to a 42% rate in 2024. Junk food is cheap, accessible, and addictive. This, again, has played with our brain’s chemical balance and has put us into a gratification-feeding frenzy that is making us unhappy and unhealthy.

So, if we put together all these factors, young and adult workers alike (mainly frontline workers) have the luxury of finding a new job as easily as snapping their fingers, don’t have much loyalty toward their employers,  eat junk food and watch their social media during during breaks, only work long enough to get out and keep enjoying their social networks for hours and eat more junk food, and are anxiously waiting for their paycheck to get a little more satisfaction by buying a new gadget or a new piece of clothing. 

What can employers do? That is a topic for a new chapter.

¹ Source: INEGI

² Source: https://www.tecnm.mx

³ Source: https://dgutyp.sep.gob.mx/

⁴ Source: https://www.ipn.mx

⁵ Source: https://tec.mx

⁶ Source: https://www.trailpathws.com/