A family member told me that he recently spoke to a friend of his from Mexico. His friend works in an auto plant and said that he makes a fraction of what autoworkers make in the U.S., though he still makes more than he would make at most other jobs in Mexico.
My family member asked me, who keeps the difference from the lower wages car companies pay to Mexican workers and the higher wages they pay to workers in the U.S.? The companies? Management?
I said, believe it or not, we do. The cost savings means we pay less for our cars than we would have otherwise, which leaves us with more to spend on other things, which in turn keeps the people who make those things busy.
He wasn’t so sure how that worked.
I said that the auto company managers would love to keep the cost savings, but they have competitors doing the same thing — building cars in Mexico to save on wages — and who will decide to pass the cost savings to the consumers in the form of lower prices to sell more cars. So, the managers will match that. Which means we pay less.
He seemed to understand that.