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As Production Wages Fall, Manufacturers Emphasize High Tech Jobs

Posted By Jeff Moad, November 25, 2014 at 11:05 AM, in Category: Next-Generation Leadership and the Changing Workforce

Ask most people what comes to mind when they think about manufacturing, and they will conjure the image of masses of semi-skilled workers toiling away on loud, dirty assembly lines. Never mind that this image bears little resemblance  to today’s reality  of clean, highly-automated production environments in which fewer people are surrounded by more computers and machines.

But it’s hard to change such deeply ingrained, culturally-reinforced perceptions, particularly because most of the people who subscribe to them have never had cause to experience a modern plant in action.

An equally ingrained perception—and one that also hasn’t been true for some time—is of manufacturing as the most important source of well-paying jobs for semi-skilled workers climbing into the middle class. Manufacturing certainly played this role at one time. But, as we and others have often reported, offshoring, automation, and the increasing globalization of most manufacturing industries have rendered this another outdated perception. Although manufacturing activity appears to be on the upswing in the U.S., and reshoring appears to be on the rise, the plentiful, relatively high-paying plant floor jobs that characterized manufacturing in the post-war period have gone away, and they are not coming back.

That fact was underscored last week with a study produced by the National Employment Law Project showing, not surprisingly, that manufacturing production jobs no longer pay better than hourly non-manufacturing jobs. In fact, citing data from the Bureau of Labor Statistics and other sources, the NELP report states that, since 2007, hourly wages for plant floor production workers have  fallen below the national average.

“While, in the past, manufacturing workers earned a wage significantly higher than the U.S. average, by 2013 the average factory worker made 7.7% below the median wage for all occupations,” the report says.

The NELP found that real wages for manufacturing production workers declined by 4.4% from 2003 to 2013. If current trends continue, the report states, hourly wages for manufacturing production workers will be almost 9% less than for the private sector as a whole in 10 years.

The NELP report blames outsourcing, automation, and globalization for the downward pressure on manufacturing production workers’ wages. And the labor-aligned group (two members of its board work for the AFL-CIO) says the drop-off in unionization has also had an impact, robbing workers of bargaining power. That’s particularly true in  the important automotive industry, the report says, where employers have increasingly turned to temporary agencies for plant workers, and where permanent job growth has been strongest at parts manufacturers which tend to pay less than automotive OEMs.

The NELP report suggests that local government policymakers rethink the substantial tax breaks and subsidies they often offer to manufacturers to influence plant location decisions. “Public entities providing subsidies should track results and hold recipients of hard-earned taxpayer dollars to account for the quality of the jobs created,” the report says.

That’s a valid and important recommendation.                          

Unfortunately, in the end, the NELP report offers a skewed view of the career opportunities offered by the manufacturing industry because it focuses almost exclusively on the wages of plant floor production workers rather than looking more broadly at the manufacturing enterprise. As manufacturing enterprises become more technology dependent and more integrated, and as they are forced to become more agile, they are increasing their demand for well-educated, savvy engineers, managers, and technicians, even as they are reducing dependence on production labor.

And, for the most part, they are paying these folks well. Another report issued earlier this year by the U.S. Census Bureau looked at the average annual payroll of all employees (not just production workers) in manufacturing and other sectors. Manufacturing came out on top, paying its employees $52,686 on average, more than healthcare and a lot more than retail. And the reports said the average in manufacturing grew by 29% between 2007 and 2012.

These impressive results can, in part, be explained by reductions in the number of plant floor production jobs in the U.S., brought on by automation and outsourcing. This has resulted in higher percentages of higher-paying jobs overall in manufacturing.

But this just emphasizes the point that, historical perceptions notwithstanding, manufacturing is now about high value-add jobs and people with the technical skills to fill them. It’s no longer about producing tons of relatively highly-paid jobs for semi-skilled people.

The macro trend among manufacturers to pay less and less for production workers does raise at least one dissonant note for me, however. Many manufacturers I speak to say they are putting a great emphasis on raising the engagement level of all of their employees, right down to the plant floor. It makes sense. Engaged employees go the extra mile, whether it’s suggesting a great lean process improvement idea or spotting and reporting a potential quality or safety problem. I wonder: Just how engaged can we expect an employee to be if he is making $9.90 an hour working for a temp agency?


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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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Comments

Posted on
The broad averages miss the point that skilled positions in both manufacturing and non-manufacturing jobs are in demand and command strong salaries that enable employees to move into the middle class. Whether that is welders, plumbers, electricians, mechanics or nurses, programmers, medical technicians, all are in demand and command solid pay. The non- skilled jobs in both manufacturing and non-manufacturing is what drives the average pay in both groups down. History majors just don’t have a useful skill, and consequently don’t command a livable wage, which is why the so frequently live in their parents basement. This is made worse by government guaranteed student debt, generating no accountability and consequently more graduates with no marketable skills.
Posted on
it would be interesting to frame the data of the report in relationship of productivity per hour and even ROI per hour for each job category. I expect the finding that line production workers are doing work with lower productivity compared to a technician maintaining a robotic assembly cell or automated production line.

Improved productivity can lead to increased wages, but improved productivity usually requires an investment - both in tools and equipment that allow for increased productivity and investment in developing new skills by the employee. This is a synergistic relationship.

Factory floor workers with the least productivity compete with a global work force with similar productivity - in other words if someone in Indiana is doing the same job with the same productivity as someone in Hangzhou then it is hard to justify paying someone in Indiana $10/hr for the same job and productivity compared to $3/hr in Hangzhou. However, if the person in Indiana is given tools or equipment that improves their productivity 5 times that of the prior effort, then it is easy to justify paying $10.hr. This is the challenge of "reshoring". As manufacturing moves to the US, it creates fewer jobs in the US than were lost in China as automation is needed to make the productivity equation equal while paying higher wages in the US.
Posted on
Thanks, Everette. Agree that even line production positions are part of a global market and must compete with resources from all over the world on the basis of productivity. It's worth noting, also, that the level of productivity needed to justify $10 per hour pay in Indiana will continue to rise as manufacturers in China and elsewhere increase automation to offset upward pressure on production wages there.
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