34th Annual Survey of Corporate Executives Commentary: Workforce Availability Affecting Corporate Strategies, Global Location Decisions
With a tight labor market, companies will to attempt to reduce the amount of human resources required to expand their footprints and output.
While scarcity and rising costs of domestic employees are driving smaller headcounts in the U.S., the survey suggests that many firms may be looking toward Mexico to supplement their manufacturing and distribution networks. Nearly one quarter of the anticipated new foreign operations are targeting Mexico, trailing only Asia in the survey. And unlike the projected U.S. facilities, the foreign facilities are expected to have much higher headcounts; half of the foreign facilities are expected to house at least 100 employees. Lower labor costs in Mexico have always been attractive to companies, but I suspect the current interest is driven by companies’ desires to not only escape the rising payrolls in the U.S., but also the escalating costs to recruit and retain talent domestically.
While Mexico’s official unemployment rate is slightly lower than that of the U.S., the labor markets in the two countries may be heading in different directions. Since the fall of 2018, the United States’ unemployment rate has slightly declined, while in Mexico that same metric has trended the opposite direction, having ticked up slightly in each of the four most recent reported quarters (according data from the Organization for Economic Co-operation and Development). This indicates that the Mexican labor market may be loosening, which is quite attractive to companies that are hungry for workers.
Until we see significant and widespread loosening, this survey signals that the availability of workers will continue to have a major influence on corporate strategies and global location decisions.
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