Mexico's auto unions agree to slash wages

Mexican auto unions are taking a cue from U.S. labor leaders by offering two-tier hiring schemes and salary cuts that bring low wages down to Chinese levels.

As more automakers turn to Mexico, a big argument for the North American Free Trade Agreement in 1993 – that Mexico's low wage rates would slowly rise to close the gap with U.S. wages – seems to have been thrown in reverse.

“The pressure has not been to raise the Mexican wages up, it's been to push the U.S. wages down,” said Ben Davis, the director of the AFL-CIO Solidarity office in Mexico City.

Wage concessions were apparently key to convincing Ford Motor Co. to direct many of the 4,500 new jobs involved in building Fiestas to the Ford plant in Cuautitlan, on the outskirts of Mexico City. Union leaders told the AP they had agreed to cut wages for new hires to about half of the current wage of $4.50 per hour.

The United Auto Workers union had hoped to preserve American jobs by offering a two-tier wage system last fall, cutting starting wages for new U.S. workers by half to about $14.20 an hour. But it hasn't worked – the jobs are flowing to Mexico, where starting wages at some plants also have been two-tiered, to as little as $1.50 per hour.

With labor costs like these, Mexico is staying competitive with China, where a worker at a foreign-owned factory can make $2 to $6 per hour.

Mexico's abundant, youthful work force is still drawn to auto plants despite the low wages, union leaders say, because the firms offer stable employment, a rarity in Mexico.