Central America is a significant hub for maquila operations, offering labor-intensive industries opportunities to take advantage of competitive wages. However, the labor costs of maquila operations in Central America vary widely across the region, and understanding these differences is critical for businesses looking to establish or expand maquila operations in the area. Recent data from the Ministry of Labor and Social Security (STSS) sheds light on these labor costs, offering insights into the factors influencing the cost of doing business in each country.
Minimum Wage and Labor Costs Across Central America
Costa Rica and Honduras have the highest labor costs for maquila operations in Central America, mainly due to their minimum wages and additional benefits. Costa Rica leads the region with a total labor cost of $1,134.42 per month, while Honduras follows with $701.49. These figures reflect the base salary and mandatory contributions such as social benefits, severance payments, and other costs employers must bear.
The STSS defines labor costs of maquila operations in Central America as the sum of the minimum wage, mandatory contributions like social security and severance payments, and any voluntary contributions made by employers. This definition helps illustrate the actual labor cost beyond the basic salary, emphasizing how labor-intensive industries must account for a broad spectrum of expenses to maintain their workforce.
Breakdown of Minimum Wages in 2023
Regarding the 2023 minimum wages applied in maquila operations, Costa Rica reports the highest stipend at $655.58 monthly. While trailing Costa Rica, Honduras still offers a relatively high wage at $423.02 per month. Other countries in the region have lower minimum wages, with Guatemala at $400.34, El Salvador at $359.16, and Nicaragua at $232.52. Depending on their labor needs and budget constraints, these differences can influence where businesses locate their maquila operations.
Costa Rica’s higher minimum wage is driven by its relatively advanced economy and the country’s efforts to maintain a higher standard of living. Meanwhile, Honduras, with the second-highest minimum wage, remains an attractive destination for industries such as textiles, electronics, and automotive due to its skilled labor force and competitive costs despite the higher salaries. The labor costs in these countries reflect their economic conditions and regulatory frameworks.
Additional Labor Costs
In addition to minimum wages, businesses must consider the additional labor costs of maquila operations in Central America. These include mandatory contributions to social security and other benefits, which vary significantly between countries. According to the Ministry of Labor, Honduras ranks second in the region with additional monthly labor costs of $278.47. This is below Costa Rica’s $478.84 but higher than Guatemala’s $238.60, El Salvador’s $198.62, and Nicaragua’s $146.99.
These additional costs represent a significant portion of total labor expenses, with Costa Rica’s labor costs comprising 73.04% of wages, followed closely by Honduras at 65.83%. Nicaragua’s additional costs represent 65.76%, while Guatemala and El Salvador come in lower, at 59.60% and 55.30%, respectively. When considered holistically, these figures highlight how the labor costs of maquila operations in Central America are more than just the base salary and can dramatically alter the cost structure of maquila operations.
The Total Labor Cost Picture
When minimum wages and additional labor costs are combined, the total labor costs of maquila operations in Central America paint a clear picture of the financial landscape businesses must navigate. Costa Rica remains at the top, with a total monthly labor cost of $1,134.42. Though significantly lower, Honduras still ranks second at $701.49 per month, followed by Guatemala at $638.94, El Salvador at $557.78, and Nicaragua at $370.51.
This disparity in total labor costs of maquila operations in Central America can influence decision-making for companies investing in maquila operations. Businesses prioritizing lower labor costs may find Nicaragua and El Salvador more attractive. At the same time, those who require a more skilled or experienced workforce might lean toward Costa Rica and Honduras despite the higher expenses.
Labor Negotiations and Wage Adjustments in Honduras
The Honduran Maquiladora Association (AHM) plays a critical role in the country’s labor market, representing 155,000 jobs in sectors such as textiles, electronics, services, the automotive industry, and commercial companies operating within the country’s free zones. These zones are vital for Honduras’ economy, providing employment and fostering foreign investment.
In 2024, Honduras is set to undergo a series of wage adjustments that will further influence the labor costs of maquila operations in Central America. The Ministry of Labor and Social Security negotiated these wage adjustments with the private sector and workers from 2024 to 2026. For 2024, the agreed adjustment is 679.72 lempiras per month, or 6.5%, bringing the minimum wage to L11,137.01. In 2025, the wage will rise by 835.28 lempiras (7.5%) to L11,972.29, and in 2026, it will increase by 975.78 lempiras (8.1%), reaching L12,930.07 per month.
These wage adjustments ensure that Honduras remains competitive in the region while providing workers with a higher standard of living. The increases also reflect the country’s commitment to balancing economic growth with fair wages for its workforce.
Conclusion
Various factors influence the labor costs of maquila operations in Central America, including minimum wages, mandatory contributions, and social benefits. Costa Rica leads the region in total labor costs, followed by Honduras, Guatemala, El Salvador, and Nicaragua. These costs can significantly impact each country’s attractiveness to businesses looking to establish or expand maquila operations.
Understanding these labor costs of maquila operations in Central America is essential for companies considering the region as a destination for maquila operations. While Costa Rica offers a more skilled workforce and higher wages, countries like Nicaragua and El Salvador present lower-cost alternatives. In contrast, Honduras balances competitive labor costs and an established maquila infrastructure, making it an appealing option for businesses across multiple sectors.