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One-Third of Production Workers Found to Need Public Assistance

Posted By Jeff Moad, May 16, 2016 at 6:48 PM, in Category: Next-Generation Leadership and the Changing Workforce

105.pngIn the latest issue of the Manufacturing Leadership Journal, a senior manufacturing executive from a large life sciences company said that the most important leadership qualities for the future will be “the ability to empower all the different levels in the organizations, so employees go above and beyond on a daily basis.” This senior executive added, “Within our organization, we are out of low-hanging fruit from improving efficiencies, which means that we rely on the entire supply chain end-to-end and need all the players constantly doing the right thing.”

We at the Manufacturing Leadership Council hear that kind of thing a lot. As global competition grows and customer expectations rise, manufacturers need everyone in the organization—from the C-suite to the production floor—pulling in the same direction, manufacturing executives tell us. At the same time, the accelerating digitization of the manufacturing enterprise means that previously arms-length functions such as product design and production are now more integrated and interdependent than ever, and that means all workers need to understand the impact their actions have on the entire life cycle of their companies’ products and services.

A recent series of reports from the Council on Competitiveness and Deloitte underscores this. The reports have consistently found that the top driver of manufacturing competitiveness is talent. The relatively high education levels of manufacturing workers in Germany and the U.S. directly lead to higher productivity and competitiveness, the studies found.

Manufacturers with better-educated and trained talent, wrote Deloitte Industrial Products Global Leader Tim Hanley, “are better prepared to take advantage of the rapid changes the global manufacturing sector is experiencing, specifically those related to the increased use of digital tools to drive innovation and growth. As their cost advantages come under fire from emerging regional players, China and India will need a deeper commitment to education to ensure they remain competitive.”

It’s disturbing, then, to learn that some manufacturers in the U.S. may be undermining their talent advantage by pursuing an extreme, low-cost strategy when it comes to how they source and compensate talent. A report published last week by the Center for Labor Research and Education at The University of California at Berkeley found that manufacturing production workers’ wages are now 7.7% below the median wage for all occupations. As of 2013, the median wage for front-line manufacturing workers was $15.66 across the U.S., the study found, with 25% of production workers earning $11.91 or less.

As a result, 34% of the families of manufacturing production workers in the U.S. enroll in public safety net programs of some kind to make ends meet. The UC Berkeley study found that, between 2009 and 2013, state and federal taxpayers spend $10.2 billion annually on public safety net programs for the families of front-line manufacturing workers.

A key factor in the declining wages of production workers is the increasing use by manufacturing employers of third-party staffing contractors, who tend to pay production workers less, the study said. The study estimates that, in 2014, nine percent of front-line manufacturing employees in the U.S. were sourced through staffing agencies, compared with 1 percent in 1989. The study found that 50% of production workers hired through staffing agencies are on public assistance.

In some instances, it appears, manufacturers may not be aware how much production workers hired through staffing agencies are being paid. Recently, automotive high-flier Tesla Motors was accused of having put on its production line in Fremont, CA, 140 foreign workers who were contracted through an agency and were allegedly being paid $5 per hour. Tesla officials said it would investigate the matter, and CEO Elon Musk reportedly tweeted, “"Sounds like the wrong thing happened on many levels. Will investigate and make it right."”

All of this brings up a couple of important questions:

  • Do manufacturers really believe that the development of a talented, engaged workforce is a key competitive weapon in the era of Manufacturing 4.0?
  • Do manufacturers believe that compensating production workers at near-minimum wage levels is the best way to build a talented and engaged workforce?

Certainly adequate compensation alone does not guarantee an engaged and agile workforce. Training, transparency, clear communication, and a sense of shared purpose are all at least as important as fair compensation structures.

On the other hand, just how engaged and committed to going the extra mile on the job can production workers be if they’re worried about how they’re going to feed their families?

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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The key to higher pay for production workers is not generosity, but rather enabling employees to become more valuable in a way that drives the profitable growth of the company. This is the point of this Forbes article on how best to deal with Minimum wages: http://www.forbes.com/sites/fotschcase/2016/04/12/how-to-cope-with-new-minimum-wage-laws
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