Thought Leadership

​Manufacturing Wages Must Continue Their Rise

Manufacturing wages are beginning to boil and grow in some states, largely because of heavy competition for the shrinking number of workers who have the skills and training that the manufacturing industry needs.

Mix in declines in unemployment and wage rises in other areas—manufacturing still falls behind the wage increases in many other sectors in the U.S.—and the gains in the “Made in the U.S.A.” renaissance look like they’re on shaky grounds.

It’s time for American manufacturers to look at the current state of the economy and our recent history with wage and benefits. Today’s business focus is like shifting sands under our feet and there’s only a limited amount of time to understand where we are losing ground and then meet the demands of the next generation or workers to regain a solid footing.

Certain-State Gains

States with an existing heavy focus on manufacturing are leading the way in terms of pay raises, even while the overall sector lags. Texan wages for production workers are up 6.3% year-over-year growth, working with federal data comparing August 2013 to August 2014, and Washington rose 4.4%.

The hope for the industry is that these wages continue to spread to other parts of the country as manufacturers focus more on employee retention than record profits. The skill shortage that we’ve seen on the horizon is starting to arrive, and it appears to be larger than expected. We’re not just seeing shortages in specialty operations, but in experience and skills at all levels.

However, other reports cut against some of these gains and say that real wages for American manufacturing employees have fallen by 4% this year. The high-paying manufacturing jobs are shrinking alongside the lower-paying positions, and the industry has also cut back on benefits for everyone.

Lowering wages will erode the base of our operational structure as time continues to wear away the top.

Losing the Lower Tier

Part of the issue with manufacturing is that our entry-level workers often come in at significantly lower wage scales, often making it an unattractive career for those looking to join our ranks. As Baby Boomers ramp up their retirement plans, we’re seeing greater holes appear in upper echelons as well as those further down the ladder.

This bottom rung has allowed companies to shift money elsewhere, especially automating processes and introducing equipment that requires specialized knowledge and experience to operate, but that has eroded our available pool of entrants to the workforce.

For example, the New York Times cites company data to note that assembly-line auto parts workers’ pay has fallen from $18.35 to $15.83 over the past 10 years. At the same time, more part-time workers were introduced into the mix, so wages were able to be lowered and benefits no longer needed to be offered. Those full-time workers who stayed on could not demand as high a wage because of this, causing the middle tier to become weaker economically as well.

We’ve worked against our long-term interests and have raised a significant concern for every aspect of American manufacturing: as the economy picks up and manufacturing’s bottom rusts out, what will we do?

Millennials and Manufacturing

To rid ourselves of this concern, manufacturers need to work on making the industry more appealing to younger workers. This includes apprenticeship programs, investment in vocational education, and clear career advancement tracks. The millennial workforce has grown up seeing their parents struggle through multiple economic shifts, and security is of the utmost importance.

Second to security is the relationship companies have with their community. Millennials are more brand-aware than most other generations could be, thanks to the wealth of information available on the Internet, and that has shaped the way they interact with the world. By shifting funds to meet those workers and improve the communities they live in, the space become more attractive by sharing the values of those we want to walk in our doors.

Retaining those workers is also a challenge, typically for the same reasons. Job hoping has become a consistent concern across the U.S., and millennials often peg their willingness to try new careers or employers on their preferences for new experiences and the struggles they saw their parents go through as companies ceased raising wages to keep up with inflation or made it difficult for retirement savings.

Changes in Mentality

All of this has led to a market where job hopping is the norm, and we must learn to adapt.

Recent reports also note that job hoppers are able to raise their wages significantly higher than those who stay with a company long-term. According to ADP, hourly-paid job hoppers in the manufacturing space saw their pay rise more than 4% this year. This cuts directly against research from the past five years, from the Stanford Graduate School of Business and others, that said job hoppers are earning less.

As the market for skilled workers continues to decline, manufacturers will need to raise the incentives for workers to join the ranks and then stay on board.

There is a lot of change in the air and some of it can be hard to swallow as we look at the shifts our businesses must make. However, the worst thing for manufacturing to do now would be to further entrench ourselves with the ideology present when we started our own careers.